Direkt zum Inhalt

Political Corruption in the Execution of Public Contracts

Discussion Papers 1607, 36 S.

Olga Chiappinelli


get_appDownload (PDF  0.57 MB)

Published in: Journal of Economic Behavior and Organization 179 (2020) S.116–140


This paper presents a novel theory of corruption in public procurement. It considers an agency setting of contract execution where the principal is a politician who can commit to a contract auditing policy. It is found that a benevolent politician, by choosing a sufficiently strict auditing, deters the contracting firm from padding costs, conversely, a selfish politician chooses a relatively lax auditing in order to create an incentive for cost-padding, and engages in corruption with the firm in case of detection. If the cost of auditing is high enough, even a benevolent politician might prefer to allow cost-padding.

JEL-Classification: D73;D82;L51
Keywords: Corruption in procurement, Cost-padding, Selfish politician, Endogenous auditing, Procurement contracts, Principal-agent model
Frei zugängliche Version: (econstor)