• How to reduce corruption in public procurement

    1

    A paper by Anh Tran, at Indiana University. Not new, but worth attention for those interested in mechanisms to effectively reduce corruption in the public procurement process:

    Which Regulations Reduce Corruption? Evidence from the Internal Records of a Bribe-paying Firm

    This paper documents pervasive corruption in government procurement and evaluates the effect of auction regimes on kickbacks, using the internal records from an Asian trading firm. The average kickback was 14.7 percent of the product cost when auctions were not required. The government mandated scoring auctions in 2001, and strengthened them to price-only auctions in 2004. Exploiting a quasi-experimental design, I find that price-only auctions are much more effective than scoring auctions in reducing corruption. Moreover, these mandatory auctions discouraged some corrupt officials from running secret auctions to identify the largest bribe-giver, therefore allocating the contracts to less efficient firms.

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