Political Connections and Public Procurement: Evidence from the Czech Republic
|Author:||Bc. Miroslav Palanský|
|Year:||2014 - summer|
|Leaders:|| Petr Janský Ph.D.
|Work type:|| Bachelors
|Awards and prizes:||B.A. with distinction from the Dean of the Faculty of Social Sciences for an extraordinarily good bachelors diploma thesis.|
|Abstract:||According to the existing literature, political connections can add value to the connected firms. This
thesis analyzes whether political connections created by donations to political parties affect the
allocation of public funds through procurement spending in the Czech Republic. Using a novel dataset
on all corporate political contributions made between 2006 and 2013, it focuses on the extreme change
in control of the regional councils following the 2008 elections. We start by observing the general
patterns of behavior of regional governments as contracting authorities which seem to support the
potential of corruption. In the second part, we focus on the effects of donations to the two most powerful
political parties in the regional councils during the examined period on regional public procurement
outcomes. The applied econometric methods suggest that donating companies win public contracts of
higher value compared to non-connected firms in times when their supported party is in power.
Controlling for the size of the firms, the results remain significant and confirm the notion that larger
companies win contracts of higher value than smaller firms.