• Workshops on procurement and concessions in Sao Paulo and Rio de Janeiro

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    On March 21-22, and 24-25 respectively, I took part in two workshops in Brazil:

    – The “Workshop on Public Procurement and Concession Design: Theory and Applications”, hosted by the Sao Paulo School of Economics – Fundação Getulio Vargas (FGV). (Program)

    – The “Workshop on Regulatory Environment and Institutions in Public Procurement”, hosted by Graduate School of Economics (EPGE) – Fundação Getulio Vargas (FGV) – Rio de Janeiro. (Program)

    It was the opportunity to meet many friends working on these topics (a set of pictures from the Sao Paulo workshops can be seen here), the organization was splendid, and the overall level of contributions outstanding. Here are some links to papers on some of the running themes of these two workshops (reflects my specific interests, and my ability to find a link to the paper, not a ranking of papers!):

    On bidding strategies in procurement:

    Strategic Bidding and Contract Renegotiation

    Efficacy of a Bidder Training Program: Lessons from LINC

    On procurement, regulation, and efficiency:

    Moral Hazard, Incentive Contracts and Risk: Evidence from Procurement

    Knowledge Spillovers in Cost-Reduction Incentives

    Procurement and Accidents: Bidding for Judgment Proofness, and the Limited Liability Curse

    Theoretical contributions on contracts:

    A Theory of Contracts with Limited Enforcement

    Long-Term Procurement under Uncertainty: Optimal Design and Implications For Renegotiation And Tender Procedures

    Finally, a couple of papers on the effects of the US stimulus plan:

    Highway Procurement and the Stimulus Package: Identification and Estimation of Dynamic Auctions with Unobserved Heterogeneity

    Government Spending and Job Creation in the Highway Construction Industry: Evidence from Texas

    Note: see also this previous post on the stimulus issue.

    I guess we are all looking forward to the second edition!

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  • SEED Development Economics Workshop at Stanford University

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    On Wednesday, March 5th, 2014, I’ll present the paper below in the SEED Development Economics Workshop at Stanford University.

    Road Access and the Spatial Pattern of Long-term Local Development in Brazil
    Julia Bird and Stéphane Straub

    This paper studies the impact of the rapid expansion of the Brazilian road network, which occurred during the 1960s to the 2000s, on the growth and spatial allocation of population and economic activity across the country’s municipalities. It addresses the problem of endogeneity in infrastructure location by using an original empirical strategy, based on the “historical natural experiment” constituted by the creation of the new federal capital city Brasília in 1960. The results reveal a dual pattern, with improved transport connections increasing concentration of economic activity and population around the main centers in the South of the country, while spurring the emergence of secondary economic centers in the less dense North. The spatial impacts on GDP and population roughly balance, meaning that the effects on GDP per capita are minimal. Over the period, roads are shown to account for half of pcGDP growth and to spur a significant decrease in spatial inequality.

     

     

     

     

     

     

     

     

     

     

     

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  • Paraguayan political firms column, on Vox.lacea

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    In April 2008, the Paraguayan Associación Nacional Republicana (ANR), locally known as the Colorado Party, was defeated in the presidential election by a coalition of opposition parties and social organizations led by a former Catholic bishop, Fernando Lugo. This was a dramatic and largely unanticipated change in a country in which the Colorado Party had enjoyed a monopoly in political power for 61 years, including the 35 years of the Stroessner dictatorship (1954-1989) and the 19 years elapsed since the 1989 coup. For six decades, the Colorado Party had systematically channeled public resources to a subset of citizens by distributing public employment and procurement contracts to the benefit of party members and supporters of the regime… (read the rest here)

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  • Regulation and the capital structure of transport concessions

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    The paper I wrote with Alex Moore (LSE) and Jean-Jacques Dethier, on the link between regulation and the capital structure of transport concessions is out in the Journal of Regulatory Economics.

    We examine the capital structure of regulated infrastructure firms. We develop a model showing that leverage, the ratio of liabilities to assets, is lower under high-powered regulation and that firms operating under high-powered regulation make proportionally larger reductions in leverage when the cost of debt increases. We test the predictions of the model using an original panel dataset of 124 transport concessions in Brazil, Chile, Colombia and Peru over 1992–2011. For each concession we have data on the regulatory regime, annual financial performance and contract renegotiations. We begin by demonstrating that, although pervasive, contract renegotiations do not fundamentally alter the regulatory regime. Importantly, firms are not systematically able to renegotiate when in financial difficulty, implying that price cap contracts remain high-powered in practice. We use this result for our main empirical work, where we find broad support for our theoretical predictions: when the cost of debt increases, firms operating under high-powered regulation make proportionally larger reductions in leverage.

    Here is the World Bank working paper version.

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  • New paper on political connections and procurement in Paraguay

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    I just posted a new TSE working paper on political connections and public procurement in Paraguay, looking at the effect of the 2008 election of Fernando Lugo on the amount of contracts going to “political” firms.

    “Political Firms, Public Procurement, and the Democratization Process”

    In 2008, an opposition coalition defeated the Paraguayan Colorado Party, which had been in power for 61 years, including 35 years of the longest dictatorship in South America. Using data of all the public procurement transactions from 2004 through 2011 and the political connections of the 700 largest public providers, this paper documents how the volume of contracts received by connected firms evolved after this landmark political change. It shows that firms connected with the first ring of power were punished and that there were efficiency gains, mostly in the form of institutions shifting to bigger and more competitive contracts, but that these gains were constrained by the scarcity of entrepreneurs able to step in to replace firms connected to the previous regime. This demonstrates that the potential economic benefits of democratization are hampered by the perverse rent-seeking entrepreneurial incentives created by a long-term single-party authoritarian regime.

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  • Immunité Dassault : la France pire que le Paraguay !

    Senat

    Le Sénat français vient de s’illustrer, en faisant corps derrière Serge Dassault et en refusant la levée de son immunité. Triste fait d’arme pour le Sénat d’un pays qui aime par ailleurs à s’ériger en parangon de démocratie sur la scène internationale.

    Il se trouve qu’il y de ça quelques mois, une affaire similaire a agité le Paraguay, un pays dont la démocratie n’est certainement pas une référence internationale, et qui traine en queue des classements internationaux de corruption. Confronté à la demande de levée d’immunité d’un des leurs, 23 sénateurs de ce petit pays avaient fait eux aussi preuve d’une remarquable solidarité avec leur collègue (accusé en l’occurrence d’avoir abusé de son influence pour obtenir plusieurs salaires de la fonction publique en faveur de sa « nourrice »).

    La réaction de la population paraguayenne avait été aussi brutale qu’inattendue. Dans ce pays habitué depuis des lustres à une corruption endémique et où la passivité était jusqu’alors la règle face aux abus flagrants de la classe politique, les réseaux sociaux ont immédiatement explosé d’indignation. Le soir même, un des sénateurs ayant voté contre le « desafuero » (la levée d’immunité) était expulsé d’un restaurant de la capitale par les clients outrés. Il faut dire qu’au Paraguay, le vote en question n’était pas secret !

    Suivait un mouvement inédit de boycott de l’ensemble de ses collègues par plusieurs centaines de commerces de tous type, qui affichaient sur leur devanture leur refus de recevoir les « senat-rats », et plusieurs manifestations massives contre la classe politique. Finalement, sous la pression, les sénateurs se voyaient obligés de revoir leur décision et votaient la levée de l’immunité de leur collègue. Depuis, plusieurs autres sénateurs, accusés de malversation diverses, ont suivi le même chemin.

    Il est peu probable qu’une telle réaction populaire ait lieu en France, ou que cette affaire ait la moindre incidence sur les chances de réélection des sénateurs concernés, et donc également peu probable qu’ils aient la moindre incitation à abandonner leur comportement corporatiste. Que les paraguayens nous donnent l’exemple en terme de décence civique n’est pas le moindre des paradoxes, mais il n’est pas pour me déplaire. Peut-être que cela pourrait nous inciter à questionner un peu plus l’opacité du fonctionnement d’une institution politique, le Sénat, dont il est parfois difficile d’être fier.

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