All for One and One for All! How Do Corruption Investigations Affect Municipalities’ Public Procurement Choices?

Marion Chabrost (Paris School of Economics )
Stephane Saussier (Sorbonne Business School)

Abstract: Using data on public procurement, we assess the impact of opening a public investigation into French municipalities’ choice of award procedures. We observe that municipalities that are suspected of being corrupt do not change their practices. We argue that such municipalities have no interest in change as long as the investigation is pending. Conversely, our results indicate that neighboring municipalities do adapt their award procedures to reduce the probability of being identified as corrupt. We conclude that even if investigations rarely lead to convictions, they are nevertheless more efficient than might appear at first glance through their positive externalities in the form of disciplining potentially corrupt neighboring municipalities.

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