Does decentralising public procurement affect the quality of governance? Evidence from local government in Europe

Abstract

ABSTRACT In this article, we consider the impact on the quality of governance when assigning public procurement spending to local authorities. While fiscal decentralisation is generally expected to yield improvements in governance because it empowers better informed voters and public officials who can tailor policies to local needs, we hypothesise that the expected benefits may not emerge when decentralising public procurement because this may facilitate rent-seeking by special interests and because it would potentially forego economies of scale, organisational benefits and spillover effects. Consistent with this, our empirical evidence, based on a sample of 30 European countries over the period 1996 to 2015, shows that decentralising public procurement down to the local level does not promote good governance. Our evidence is robust to the introduction of different checks and specifications and shows that the impact of decentralisation on governance depends on the nature of the spending category decentralised.