Is competition able to mitigate the waste effects of corruption? An exploratory investigation of Italian public work contracts
The aim of this paper is to provide an empirical test of the impact of competition in procurement to reduce the effects of ‘environmental’ corruption. For this purpose, the paper examines whether competition is able to constrain the waste effects of corruption in the area where the public work is localised. We develop prior literature on the effects of corruption on infrastructure provision assessing whether more competition matters in constraining ’environmental’ corruption. For this purpose, a two-stage analysis is carried out. In the first stage, a non-parametric approach (Data Envelopment Analysis - DEA) investigates the relative efficiency of each public work execution; in the second stage, the determinant factors of the variability of efficiency scores are investigated. Our results, in line with previous studies, show that greater corruption in the area where the infrastructure is localised is associated with lower efficiency in public contracts execution. We also show that increasing competition does not mitigate the negative effects of ‘environmental’ corruption on public works executions. (Co-authored with: C. Guccio, G. Pignataro, I. Rizzo)
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Massimo Finocchiaro Castro is associate professor of public finance at the Mediterranean University of Reggio Calabria (Italy). His first stream of research focuses on the application of the methodology of experimental economics to several topics such as public goods provision, corruption and fiscal federalism. A second line of research concerns the empirical analysis of public sector efficiency focussed on judicial services, public procurement and health systems. He is currently working on the effect of environmental corruption on educational outcomes at primary schools. He holds a M.A. in economics from the University of Manchester and a Ph.D. in economics from the Royal Holloway College, University of London.