Political corruption in the execution of public contracts

Olga Chiappinelli

Journal of Economic Behavior & Organization, 2020, vol. 179, issue C, 116-140

Abstract: This paper presents a novel theoretical framework to explain the occurrence of corruption in public procurement. It extends the agency cost-padding model by Laffont and Tirole (1992) to allow for the principal to be a partially selfish politician who can design the 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.

Keywords: Corruption in procurement; Cost-padding; Selfish politician; Endogenous auditing; Procurement contracts; Principal-agent model (search for similar items in EconPapers)
JEL-codes: D73 D82 L51 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268120303231
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Political Corruption in the Execution of Public Contracts (2016)
Working Paper: Political corruption in the execution of public contracts (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:179:y:2020:i:c:p:116-140

DOI: 10.1016/j.jebo.2020.08.044

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().