Government Costs Research Articles

Blockchain technology for pay-for-outcome sustainable agriculture financing: implications for governance and transaction costs

Pay-for-outcome financing mechanisms have been used to address agricultural runoffs to overcome the inefficiencies associated with push-based solutions, which are dependent on subsidies or philanthropic funding. As a market-based approach, pay-for-outcome platforms seek to incentivize sustainable practices, compensated by beneficiaries of the positive outcomes. Execution of pay-for-outcome financing mechanisms in an agriculture context is a complex transaction, involving investors, farmers, third party verifiers of outcomes, government and corporate beneficiaries, and thus requires a costly governance structure. Effective governance mechanisms are needed to meet the transaction costs identified in performance measurements. This study investigates the efficacy of blockchain technology to address transaction costs in pay-for-outcome financing for sustainable agriculture. Through a proof-of-concept, this study quantifies and explores the potential cost-saving benefits of utilizing blockchain. The proof-of-concept is an application of blockchain within a pay-for-outcome incentive model, namely the Soil and Water Outcomes Fund, for sustainable agriculture. Utilizing the Ethereum blockchain, transactions are facilitated through crypto wallets and a hybrid smart contract, while precipitation is used as a proxy for agricultural runoff measurements. Drawing from Transaction Cost Economics theory, a discussion is presented on how blockchains can reduce transaction costs, enhancing the governance and efficiency of pay-for-outcome mechanisms. Furthermore, the article presents blockchain transaction fees in the context of the scale of operations, considering the total number of participants in the Soil and Water Outcomes Fund. Our findings indicate that blockchain technology has the capacity to simplify intricate transactions, boost measurement accuracy, cut administrative expenses, and foster trust and transparency among stakeholders, thereby reducing the overall transaction costs associated with pay-for-outcome incentives. While blockchain has its limitations and is not a universally applicable solution for every type of transaction cost, we believe that blockchains are well-suited to facilitate pay-for-outcome financing such as the Soil and Water Outcomes Fund.

Integrated Tourism: A Holistic Approach to Resolving Fragmentation Challenges in Tourism Governance

At its core, integrated tourism is a public governance issue. The current fragmented state of local government organizational functions and public governance in China, coupled with the inherent complexity in tourism management, has led to fragmented governance subjects, fragmented resource allocation, and fragmented governance mechanisms in tourism practices. These existing governance challenges increase the cost of governance and, to some extent, hinder the development of the tourism industry. The emphasis on collaboration, co-governance, and sharing in "integrated tourism" aligns seamlessly with the principles of integration, public responsibility, and citizen demands proposed by the theory of integrated governance. It provides a new path for addressing the fragmented governance in the tourism industry. From the perspective of integrated governance, the diversification and comprehensiveness advocated by integrated tourism, along with the coordination and integration of tourism with other industries, and the innovation in operational mechanisms, represent novel approaches to overcoming the challenges of fragmented governance in the tourism industry.

The Enhancing Effect of Government Cost Accounting Informatization on Fiscal Expenditure Efficiency

Abstract Accounting is an important part of the modern economy and society, and accounting informatization has gradually become the development trend of an accounting system. Government fiscal expenditure efficiency is also significantly affected by accounting automation. The study improves the DEA-BBC model to measure the efficiency of fiscal expenditure and adopts the PSM-DID model to construct the model of the effect of accounting informatization on the efficiency of fiscal expenditure according to the theory of government cost accounting and accounting informatization. The effect of government accounting information technology on fiscal expenditure efficiency is empirically studied. Government cost accounting information is selected as the explanatory variable, fiscal expenditure efficiency is selected as the explanatory variable, and control variables are introduced for regression analysis. The mean value of fiscal expenditure efficiency is 0.743, the minimum value is 0.216, the maximum value is 1.000, and the standard deviation is 0.230. The coefficient of government cost accounting informatization is 0.058 before adding control variables, but it increases to 0.065 after adding control variables. For every 1% decrease in government cost accounting informatization, the proportion of fiscal expenditure, the proportion of education expenditure, medical expenditure share, and social security and employment expenditure share rise by 1.1568, -0.4135, -0.2764, and -0.5011 units, respectively. The higher the government’s financial self-sufficiency and the smaller the government, the more efficient fiscal expenditures.

A differential game of water pollution management in the trans-jurisdictional river basin

Strengthening cooperation of water pollution management in the trans-jurisdictional river basin is of great significance for ensuring water security and deepening the construction of ecological civilization. Therefore, this paper established a dynamic differential game model of pollution management in the trans-jurisdictional river basins composed of upstream and downstream governments and sewage enterprises, calculated the strategic equilibrium solution of multi-stakeholders, analyzed the changes of strategy selection of different stakeholders under cost and non-cost sharing, and simulated strategy selection of stakeholders under multi-scenarios. The main findings are as follows: (1) Cost sharing policy enhances the governance efforts level of all stakeholders and increases social welfare. (2) The selection of governance strategies by multiple stakeholders has an interactive influence which is affected by the cost–benefit relationship of each stakeholder. The proportion of cost sharing and incentives affect the variation of the utility of the upstream government, downstream government, and sewage enterprises in cooperation. (3) The increase in the attenuation coefficient of governance utilities and the governance costs of the three parties will reduce the level of water pollution management efforts of the three parties. (4) The increase of marginal utility and social welfare effect will enhance the level of governance efforts. (5) The cost sharing ratio of the downstream government has an impact on the governance efforts of the upstream government. (6) Downstream government rewards, corporate social reputation, and external influence coefficient of regional river pollution management has an important impact on the level of governance efforts of sewage enterprises. Based on the above conclusions, this paper puts forward suggestions from the perspectives of cooperation strategies, reward and punishment mechanisms, and the application of advanced technology and equipment to help strengthen cooperation of water pollution management in the trans-jurisdictional river basin.

Losing trust when pursuing development: How automation hindered political trust in China?

The side effects of automation on the economy have been discussed frequently, but little is known regarding its political consequences. This paper examines the causal effect that automation induces on political costs for the local government. By combining the national individual-level panel data of political trust with the prefecture-level robot exposure rate in China, we find that the development of automation would reduce individuals’ political trust in the Chinese local government. Furthermore, we explore the channels through which the automation process could affect political trust, namely the risk of unemployment, intensified pessimism about local government, higher downside risk, and declining organization participation. This paper provides empirical evidence for the impact of automation and the source of political legitimacy, emphasizing the crucial role of governments in coping with technological progress and making good use of endogenous creative destruction.

Research on the sustainable development mode of resource‐oriented regions on plateaus—A case study for Gannan Tibetan autonomous prefecture

AbstractMany resource‐oriented regions on plateaus (RORP) are facing the double threat of ecological destruction and resource exploitation. The traditional development mode will destroy fragile ecosystems in RORP, resulting in substantial environmental governance costs and environmental restoration difficulties. Therefore, realizing the sustainable development of these regions has become a major topic of interest. In this study, we designed a sustainable development mode, that is, “conservation mining‐ecological restoration‐substitute industries‐energy saving and emission reduction” (CESE), for RORP. The integration of the Integrated Valuation of Ecosystem Service and Tradeoffs (InVEST) model and the system dynamics (SD) model were used to evaluate and simulate the comprehensive effect and future trends of the sustainable development mode in the RORP. The evaluation and simulation results clearly show that through long‐term stable operation, this sustainable development mode can alleviate the double threat of the “unbridled development‐fragile ecosystem”(UDFE) and achieve synchronous growth of ecological, economic, and social benefits. Additionally, this study further proposes the potential risks of this mode and directions for iterative improvements, serving as goals of regional optimization and improvement in the future. The sustainable development mode of RORP proposed in this study has important theoretical significance and practical value for mitigating the double threat associated with the development of RORP.

Foreign direct investment, foreign aid and economic growth nexus in Kenya

The increasing role of foreign capital inflows in reducing the disparity between government revenues and costs as well as impellent economic growth has motivated this study to establish the direction of causality between foreign direct investment (FDI), foreign aid, and economic growth in Kenya. By using annual time series data from 1970 to 2020 within bounds testing approach to cointegration and the error correction model ECM-based Granger-causality, the study found a bidirectional causality between foreign aid and economic growth in the short run and a unidirectional causal flow from foreign aid to economic growth in the long run. The results also support evidences of bidirectional causality between FDI and foreign aid in the short run and a unidirectional causal flow from foreign aid to FDI in the long run. However, the study found no causal relationship between FDI and economic growth, irrespective of whether the causality test is conducted in the short run or in the long run. These empirical findings are encouragement to policy makers in Kenya to carefully channel foreign aid in productive sectors to positively influence economic growth and foreign direct investment, as most relevant targets in achieving Vision 2030 and the Sustainable Development Goals (SDGs).

Research on the evolutionary game of multi-agent collaborative supervision of enterprise green behavior driven by big data

Based on evolutionary game theory, this paper constructs a tripartite game model—involving the government, enterprises, and environmental protection social organizations—to explore an effective path for the collaborative supervision of corporate green behavior by multiple agents in the context of modern digital technology. The impacts of participating agent strategies are analyzed numerically, and the key factors affecting the ideal state are explored and simulated. The main conclusions and insights are as follows: 1) An increase in government information disclosure can effectively constrain enterprises’ behavior, by confronting them with the prospect of loss of reputation. However, if the enterprises’ loss of reputation is excessive, they will feel over-regulated, which is not conducive their carrying out green innovation. Information disclosure does, however, have a role to play in transmitting environmental information to the public and environmental protection social organizations in a timely manner to reduce the information gap and promote the formation of multi-dimensional common governance. 2) By using big data, the government can not only save on government costs, but also more accurately identify and monitor in real time enterprises that are causing pollution and that are not using green technology. This can notably promote the evolution of all parties to an ideal state and improve the effectiveness of regulation. 3) When environmental social organizations provide enterprises with the necessary resource supports, this can significantly promote improvements in the enterprises’ level of enterprises’ green technology innovation. 4) Increased willingness on the part of the public to supervise can enhance the interaction between the public and environmental social organizations, prompting those organizations to actively carry out environmental protection activities and increase their popularity among the public, which will have a positive effect on how the system involving government, enterprises, and environmental protection social organizations evolves.

An Empirical Nexus between Corporate Governance Practices and Cost of Equity: Evidence from PSX-Listed Firms

The current study scrutinizes the relationship between the cost of equity and corporate governance practices within companies listed on the Pakistan Stock Exchange (PSX).The Capital Asset Pricing Model (CAPM) is applied to determine the cost of equity. A Sys-GMM model was applied to a sample of 170 businesses listed on the Pakistan Stock Exchange (PSX) from 2014 to 2019 to establish a connection between the variables. Sys-GMM is effective in addressing endogeneity issues related to corporate governance variables. In addition, the Sys-GMM results were compared with pooled OLS and fixed effects. It was discovered that the subsequent approaches failed to address the endogeneity issue, consequently yielding biased results. The findings unveiled a negative nexus amid cost of equity and block ownership. The output indicated that board size plays a key role in reducing the cost of equity. Interestingly, audit quality is directly related to equity cost, however, female directors and leverage were not linked with the cost of equity. The findings will direct policymakers in expanding or adapting the scope and depth of corporate governance practices, which will certainly facilitate the production of the right corporate climate in the country.

Carbon constraints and carbon emission reduction: An evolutionary game model within the energy-intensive sector

Energy-intensive enterprises form the backbone of low-carbon transformation in our society, which is attracting significant attention in terms of government policy-making. However, existing studies focus largely on the behavior of governments or enterprises in emission reduction; what is not asked—and therefore not explained—is the coordination mechanism between government and industry. More crucially, very few studies have taken the initial willingness of both governments and enterprises into consideration. The absence of that research may lead to a certain amount of conflict between economic development and environmental protection by local governments, leading to looser regulation. Meanwhile, energy-intensive enterprises would perceive local governments as tending toward laxity, further negatively affecting emission reduction. To help fill in these gaps in the literature, we build an evolutionary game model consisting of energy-intensive enterprises and the government. Specifically, we first construct a revenue matrix including governments and energy-intensive enterprises, and then analyze their evolutionary stabilization strategies in four cases: strict regulation with carbon emissions, strict regulation without carbon emissions, loose regulation with carbon emissions, and loose regulation without carbon emissions. It should be noted that the model is built with consideration of penalties levied by higher-level governments for lax regulation by local governments. Likewise, in the initial game state, the probabilities of energy-intensive enterprises taking the initiative to reduce emissions and strict government regulation represent the initial intention the respective parties. Finally, the dynamic evolution process is simulated numerically. Our main findings are as follows. 1) Government regulations and costs of reducing emissions are determinants of the equilibrium state in the game model. In the case of loose regulations or high emission reduction costs, both governments and enterprises embrace strategies with a negative effect on emission reduction. 2) Without effective external constraint mechanisms, both the government and enterprises would make decisions to maximize their own benefits. Doing so would lead to a sub-optimal equilibrium, impeding the achievement of ideal emission reduction goals. 3) The initial willingness of governments and enterprises determines emission-reduction paths. Likewise, the initial intention to engage in strict regulation by governments exerts a stronger constraint on enterprises. Therefore, to guarantee policy efficiency, governments need to implement strict regulations, decrease enterprises’ emission reduction costs, and enhance the initial willingness of both sides. Under these conditions, energy-intensive enterprises would be more likely to accomplish low-carbon transformation.

Does climate change drive up government healthcare costs in the European Union?

The continuous growth in average temperature around the world, caused especially by CO2 emissions, generates climate changes significantly impacts not only economic or social domains, but also human health. The previous literature provides evidence of degradation of human health due to climate change and emphasizes pressure on governments to increase government spending on health. The aim of this study is to analyze the impact of climate change, expressed by temperature and CO2 emissions, on healthcare spending in the European Union member states using available data from 2000 to 2020. In addition to prior research, this paper incorporates supplementary control variables such as governance, macroeconomic factors (GDP and inflation) and human development index. To capture the dynamic impact of climate change on healthcare expenditure, we use the Generalized Method of Moments (GMM) technique and the panel VAR Granger causality method. Empirical findings suggest that an increase in temperature and CO2 emissions levels, along with improvements in governance, economic growth, inflation, and human development, contribute to higher healthcare expenditures. Rising temperature and CO2 emissions are directly increasing the health burden on individuals’ health and force governments to enhance health spending. The paper is notable for its comprehensive approach, filling a significant gap in existing literature by combining climate change variables with governance, economic and human development indicators. The study provides policymakers with valuable insights into how climate change and other governance, economic and human factors impact healthcare spending. Global warming appears as a topic directly correlated with the governmental health spending burden and highlights the need for government involvement in mitigating global warming, reducing pollution and gas emissions.

High-speed rail and local government financing cost: Evidence from China

Local government debt has grown rapidly in China, threatening financial stability and economic growth and raising concerns globally. Although previous literature has examined various determinants of local government debt cost, little attention has been paid to the potential effect of transportation infrastructure on it. Utilizing data of Chinese municipal corporate bonds from 2008 to 2019, we examine the effect of high-speed rail (HSR) on the financing costs of local government in peripheral cities. We find that HSR access leads to higher issuance credit spread of municipal corporate bonds, suggesting that opening HSR increases rather than decreases local government financial costs. This result is robust after addressing potential endogeneity issues. Moreover, our mechanism analysis shows that the “implicit guarantee mechanism” accounts for this effect. Overall, this paper highlights the essential role of transportation infrastructure in determining local government financing costs.

Informal Cross-Border Trade in Africa: Operations, Policy, and Opportunities

Informal cross-border trade (ICBT) refers to the illegal activities of cross-border commerce conducted by unregistered small-scale traders. We seek to develop insights to understand the ICBT value chain and offer policy recommendations to successfully integrate it into the formal economy. Using a game-theoretic model, we analyze the operations and key market dynamics of ICBT. We analyze the policy implications of three representative UN directives: enhancing marginalized traders’ access to formal channels, reducing export tax rates for formal traders, and introducing an alternative simplified trade regime (STR) for informal traders. All three policies result in an increase in government proceeds when the inherent profitability of the formal or STR channels is sufficiently high. Furthermore, social welfare increases when the policies effectively balance wholesale price competition within the formal and informal channels. We apply our model to a case study based on Uganda’s agricultural exports over an 11-year horizon. The access enhancement policy is most effective in increasing government proceeds but least effective in improving the welfare of other participants. The tax reduction policy enhances traders’ profitability but sacrifices the welfare of farmers and government proceeds substantially. Finally, the STR acknowledgement policy results in the largest increase in profitability of marginalized traders and farmers but comes at the cost of government proceeds. This paper was accepted by Jay Swaminathan, operations management. Funding: This work was supported by the Institute of Management Research, College of Business Administration, Seoul National University. Supplemental Material: The data and online appendix are available at https://doi.org/10.1287/mnsc.2022.02479 .

The Impact of INGO Climate Shaming on National Laws

Does INGO climate shaming translate into actual climate laws, or is it ineffective in altering the behavior of governments? This article provides the first systematic assessment of whether and under what conditions INGO climate shaming can influence national climate policymaking. Drawing on social movement and NGO literatures, we argue that INGO climate shaming can incur reputational costs for governments through two main pathways: public opinion and transnational politics. To test our propositions, we generate a unique dataset on INGO climate shaming, utilizing natural language processing (NLP) to extract INGO climate shaming events from media sources, covering the period 1990–2020. We find that climate shaming is generally effective in pushing government to introduce climate laws. Particularly, we find that climate shaming is consequential when governments are trade-dependent and have committed to global climate norms. Our findings provide substantive implications for the global climate governance literature.

Teaching the Complex Dynamics of Clean Energy Subsidies With the Help of a Model-as-Game

The economic and policy justifications for clean energy subsidies are complex and difficult to internalize. A subsidy induces additional consumers to buy, reducing carbon emissions through reduced fossil fuel consumption. Over the long term, subsidies encourage industry investment and cost reductions. Ideally, subsidies can be removed when the technology is broadly competitive. Deciding on an appropriate level of government subsidy is complex because a decision-maker should balance government expenditures and benefits over both time and space. A subsidy can be excessive when government costs are too high and/or many consumers would have purchased the unsubsidized product, but can also be too low if insufficient to encourage adoption. In order to educate non-experts on these ideas, we created a case study about the topic, consisting of teaching materials and a cooperative multiplayer game that is playable in small groups in 15–30 min. We have used the case study in both university courses and public-facing events and believe that it would be of interest as teaching material for cost-benefit analysis, government subsidy design, clean energy policy, and science and technology policy education or training. After 15 min with the game, players have a basic understanding of all the important factors and dynamics of subsidy design. For the reader, this article offers a specific example of how to translate a sophisticated technoeconomic decision model into an educational game and includes rules and supplementary materials needed to cover the topic of subsidy design and to try the game in courses and general public settings.

'We've got a present for you’: Hepatitis C elimination, compromised healthcare subjects and treatment as a gift

With the advent of highly effective and tolerable direct-acting antiviral treatments for hepatitis C, widespread optimism for and investment in the project of disease elimination now informs the public health response. In Australia, the Commonwealth government has invested heavily in elimination by universally subsidising treatment, promising access for all. Reflecting concerns that commonly accompany ambitious public health projects, cost for governments supporting access to the treatment and cost for individuals consuming it have emerged as central issues. Drawing on 30 interviews with people who have been cured of hepatitis C with direct-acting antivirals, this article examines how cost shapes experiences of hepatitis C treatment and cure in Australia. Drawing on Lauren Berlant's (2011) influential work on ‘cruel optimism’, we analyse three interconnected ways that notions of cost shape participants' views of treatment as a beneficent gift from the state: (1) understandings of treatment access as a form of ‘luck’; (2) conceptions of the cost of treatment; and (3) criticisms of others who are seen to waste state resources by not taking up treatment or by re-acquiring hepatitis C. We argue that, together, these dynamics constitute people affected by hepatitis C not as citizens worthy of public investment and fundamentally entitled to care, but as second-class citizens less deserving of treatment and of the health care to which they might otherwise be considered entitled. It is within this dynamic that the compromised quality of elimination optimism takes shape, binding people affected by hepatitis C to an inequitable relationship to health care, reproduced through the very things that promise to free them of such inequality – investments in access to treatment and cure.

Assessing the Fiscal Burden of Obesity in Canada by Applying a Public Economic Framework.

Rising obesity prevalence is a health priority for many governments because of its impact on population health and economic consequences. We sought to estimate the broader consequences of obesity in Canada by applying a government perspective framework that captures lost tax revenues and increased government spending on social benefit programs. An age-specific prevalence-based model was built to quantify the fiscal burden of disease for government attributed to people living with obesity. The model was populated with age-specific wages, employment activity and government benefits received to estimate taxes and transfer costs. A targeted literature search was conducted to identify modifiers of employment status, wages and disability status attributed to people with obesity, and applied to employment and epidemiological projections which enabled us to estimate government costs and tax losses. Government tax revenue and costs attributed to obesity were projected over a 10-year period and discounted at 3%. The fiscal burden of obesity in Canada is estimated at CAD$22,974 million (2021). This figure consists of obesity-attributed revenue losses of CAD$9404 million from direct taxes due to decreased employment activity and CAD$2374 million from indirect tax revenue losses due to reduced consumption taxes. Healthcare costs are estimated at CAD$7881 million annually and disability costs of CAD$3686 million annually. This fiscal burden of disease distributed amongst taxpayers in 2021 is estimated to be CAD$752 per capita. We estimate for every 1% reduction in obesity prevalence, CAD$229.7 million net fiscal gains can be achieved annually. Obesity is associated with substantial clinical and economic burden not only to the healthcare system but also to wider government budgets as demonstrated using fiscal analysis. Reductions in obesity prevalence are likely to have positive fiscal gains for government from reduced spending on public benefits and increased tax revenue attributed to employment changes.

A tripartite evolutionary game analysis of sports data rights protection from the perspective of stakeholder.

The amount of data in the globe is increasing at an exponential rate, and the role of digital technology and data elements in the modern growth of China's sports business is becoming more significant. Disputes over sports data rights have grown in the international arena, with a special focus on how to preserve the sports data rights of key stakeholders. This study begins from the standpoint of stakeholders, constructs a tripartite evolutionary game model of the government, sports enterprises, and the public around the issue of sports data rights protection, investigates the behavioral evolutionary characteristics of each stakeholder and its stabilization strategies, simulates and analyzes the evolutionary stabilization strategies of the stakeholders in various situations using MATLAB, and proposes a compatible institution. According to the findings of this study, the cost of sports data governance, the cost of sports data sharing, the degree of sports data compliance use, the government incentive system, and the government regulation mechanism are the important elements impacting each stakeholder's behavioral decision-making. Based on the foregoing, the study proposes corresponding institutional strategies for governments to respond to the issue of sports data rights, which will be more conducive to the safe use of data for development and humanitarian action, as well as contribute to global sustainable development.

Game Analysis of Digital Inclusive Financial Platform and Family Entrepreneurial Choice

The difficulty and cost of financing for family entrepreneurship are becoming increasingly prominent, and the issue of how to alleviate the financing constraints of family entrepreneurship has attracted widespread social attention. The financial services provided by digital inclusive finance platforms are beneficial in addressing the negative impact of financing constraints on households' entrepreneurial behaviour. They can contribute to the inclusive growth of China's economy. Thus the financial policies of digital inclusive finance platforms influence households' entrepreneurial choices. This paper constructs a dynamic game model of incomplete information between the platform and families based on the game perspective of micro subjects and explains the impact of the decision of the digital inclusive finance platform on households' choice of entrepreneurship by solving the equilibrium solution in the game tree, and explores the effects of factors such as the government subsidy system, costs and benefits, and the risk of platform loans on the decision-making behaviour of households and the platform by analysing the conditions required for the decision-making subjects to change their decisions in each sub-game. This essay explores the impact of government subsidies, costs, benefits, and the risk of lending to the platform on the decision-making behaviour of households so that the digital inclusive finance platform and families choose the "no support" and "no business" decisions. According to the dynamic game analysis, the government and the digital inclusive finance platform should increase subsidies to the platform, reduce the cost of household entrepreneurship and improve the guarantee system for household entrepreneurship; the digital inclusive finance platform should make use of digital information technology to enhance the platform construction, alleviate information asymmetry, reduce the cost of platform services, actively support household entrepreneurship and promote the increase of household entrepreneurship.

Analisis Perusahaan Jasa Konstruksi Terafiliasi dalam UU Jasa Konstruksi dan UU Larangan Praktek Monopoli dan Persaingan Usaha Tidak Sehat

The economy of a country is closely related to economic transactions carried out by actors, namely producers, sellers and buyers. Such conditions increase the value of efficiency and reduce government costs due to community participation. This is in accordance with the objectives of Law number 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition and Law number 2 of 2017 concerning Construction Services. Therefore, it is necessary to examine the compatibility between Article 44 of the Construction Services Law and Article 22 of the Antimonopoly and Unfair Business Competition Law and the position of affiliated construction companies in tenders for government procurement of goods and services using the rule of reason and per se illegal approach. The research method in this journal is normative juridical, library research and comparative study. So it can be concluded that article 44 of the Construction Services Law prohibits affiliation between service users and service providers (collutive vertical) with an illegal per se approach while article 22 of the Antimonopoly and Unfair Business Competition Law prohibits affiliation with a rule of reason approach. The method of inviting or directly appointing a service provider can create an affiliation relationship between the user and the service provider which can be interpreted as a form of nepotism. All parties involved in the process of procuring goods and/or services by the government must follow the principles of fair business competition.