Publication: Deterring Kickbacks and Encouraging Entry in Public Procurement Markets: Evidence from Firm Surveys in 88 Developing Countries
Date
2017-05
ISSN
Published
2017-05
Author(s)
Knack, Stephen
Biletska, Nataliya
Kacker, Kanishka
Abstract
There is relatively little systematic
evidence on the links between procurement systems and
outcomes such as competition and corruption levels. This
paper adds to the evidence base, using data on almost 34,000
firms from the World Bank’s Enterprise Surveys, in 88
countries that also have procurement systems data from
Public Expenditure and Financial Accountability (PEFA)
assessments. The analysis finds that in countries with more
transparent procurement systems, where exceptions to open
competition in tendering must be explicitly justified, firms
are more likely to participate in public procurement
markets. Moreover, firms report paying fewer and smaller
kickbacks to officials in countries with more transparent
procurement systems, effective and independent complaint
mechanisms, and more effective external auditing systems.
These findings—particularly on kickbacks—are robust to the
inclusion of many controls and to a range of sensitivity
tests. The study finds evidence that better procurement
systems matter more for smaller firms’ participation in
procurement markets and payment of kickbacks to obtain
contracts, consistent with the view that information and
transactions costs that are incurred in learning about
bidding opportunities and fulfilling bidding requirements
are more onerous for smaller firms. Falsification tests show
that other, non-procurement indicators from the PEFA
assessments are not associated with procurement outcomes,
and that the PEFA procurement indicators are not strongly
associated with other “governance”-related outcomes in firm
surveys that are unrelated to procurement.
Link to Data Set
Citation
“Knack, Stephen; Biletska, Nataliya; Kacker, Kanishka. 2017. Deterring Kickbacks and Encouraging Entry in Public Procurement Markets: Evidence from Firm Surveys in 88 Developing Countries. Policy Research Working Paper;No. 8078. © World Bank, Washington, DC. http://hdl.handle.net/10986/26950 License: CC BY 3.0 IGO.”
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