Tenure in Office and Public Procurement

Abstract

We study the impact of politicians' tenure in office on the outcomes of public procurement. To this purpose, we match a data set on the politics of Italian municipal governments to a data set on the procurement auctions they administered. In order to identify a causal relation, we apply two different identification strategies. First, we implement a Regression Discontinuity Design by comparing elections where the incumbent mayor barely won another term with elections where the incumbent mayor barely lost and a new mayor took over. Second, we cross-validate these estimates using a unique quasi-experiment determined by the introduction of a two-term limit on the mayoral office in March 1993. This reform granted one potential extra term to mayors appointed right before the reform. The main result is that an increase in the mayor's tenure is associated with worse outcomes: fewer bidders per auction, a higher cost of procurement, a higher probability that the winner is local and that the same firm is awarded repeated auctions. Taken together, our estimates are informative of the possibility that time in offce progressively leads to collusion between government officials and a few favored local bidders. Other interpretations receive less support in the data.