Political connections and misallocation of procurement contracts: evidence from Ecuador

F. Brugués, J. Brugués and S. Giambra

No 1394, Research Department working papers from CAF Development Bank Of Latinamerica

Abstract: This paper uses detailed ownership information of private firms in Ecuador and the identity of bureaucrats to document the effects of political connections on firm size and the allocation of government contracts. Reduced-form estimates show a significant positive effect of political connection on sales, assets, debt, and costs. Using contract-level data, we find that politically connected firms enjoy higher probability of winning discretionary contracts and charge higher prices for homogeneous goods and services than unconnected firms. Back-of-the-envelope calculations indicate a political connection premium of 475 million USD per year in overpricing. Further analysis from production function estimates suggest that politically connected firms are less efficient than unconnected ones. This translates into a 1.5 to 3.5 percent excess cost of provision.

Keywords: Economía; Investigación socioeconómica (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://scioteca.caf.com/handle/123456789/1394

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:dbl:dblwop:1394

Access Statistics for this paper

More papers in Research Department working papers from CAF Development Bank Of Latinamerica Contact information at EDIRC.
Bibliographic data for series maintained by Pablo Rolando ().