Weakening political connections by means of regulatory reform: Evidence from contracting out water services in Spain

Daniel Albalate, Germà Bel, Francisco González-Gómez and Andres Picazo-Tadeo

Journal of Regulatory Economics, 2017, vol. 52, issue 2, No 6, 235 pages

Abstract: Abstract One area of public policy where rent-seeking and favoritism is relatively common is the contracting out of public services. Private firms can improve their chances of obtaining contracts by bribing politicians or public servants and funding political parties. In the same vein, firms can gain access to policymakers by hiring influential former politicians—a practice commonly referred to as revolving-doors. In this paper, we use information from 922 privatizations of water services in Spanish municipalities between 1984 and 2016 and multinomial logistic regression techniques to study the association between specific firms securing contracts and the political parties ruling the municipalities. We find robust statistical evidence of an association between the Popular Party (Partido Popular or PP) and the firm Aqualia, part of the large Spanish holding company Fomento de Construcciones y Contratas (FCC), which is known to have funded the Popular Party. Furthermore, former PP politicians have been appointed to top positions in the FCC Board of Directors. However, this relationship weakened after the institutional reform of 2007 on public procurement and financing of political parties, which is empirically evaluated in this paper.

Keywords: Rent-seeking; Political connections; Privatization; Urban water services; Spain (search for similar items in EconPapers)
JEL-codes: D73 L33 L95 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1007/s11149-017-9338-6 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
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:kap:regeco:v:52:y:2017:i:2:d:10.1007_s11149-017-9338-6

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11149/PS2

DOI: 10.1007/s11149-017-9338-6

Access Statistics for this article

Journal of Regulatory Economics is currently edited by Menaham Spiegel

More articles in Journal of Regulatory Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().