Speed of Payment in Procurement Contracts: The Role of Political Connections∗

Ricardo Dahis, Bernardo Ricca () and Thiago Scot ()
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Bernardo Ricca: Insper
Thiago Scot: Development Impact (DIME), World Bank

No 2024-07, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: We provide evidence of a new channel through which politicians can exchange favors with campaign donors: earlier payment in procurement contracts. We exploit an electoral reform in Brazil that bans corporate contributions and partially breaks down the relationship between donors and politicians. Using a within-firm difference-in-differences identification strategy, we find that connected firms experience longer payment terms post-reform. The effect is larger in municipalities with low liquidity, where payment delays are more common, and for contracts awarded through a competitive tendering process. Our results point to the importance of designing rules that curb discretion over the contract execution process in government purchases.

Keywords: Payment timeliness; public procurement; political connections (search for similar items in EconPapers)
JEL-codes: D72 H57 H72 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-cdm, nep-cta and nep-pol
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