Page 4 - IDEA Studie 14 2016 Konkurence politickych uskupeni

Study 14 / 2016

Political Competition in Local Governments
and Public Procurement2

OCTOBER 2016

JÁN PALGUTA

Summary

 Municipalities in the Czech Republic manage 23.9% of the total public expenditure
(approximately 10% of the GDP), with approximately half of these funds redistributed
through public procurement. This is a very significant amount of public resources that
should be given due attention.

 This analysis demonstrates that the composition of municipal governments significantly
influences the process of public procurement. Our methodology allows to interpreting
the estimated relationships as causal, rather than as mere correlations.

 Municipalities with broader party representation open the tenders for public contracts
to a wider range of suppliers and achieve lower contract prices. At the same time, public
contracts are less often awarded to companies which make donations to political
parties. Our methodology, however, does not allow to distinguishing whether our
results stem from more intensive competition for public contracts or they are a
consequence of suppressed conflict of interest of elected officials due to a closer mutual
scrutiny within local governments.

 The impact of broader party representation in local governments on public procurement
is evident especially when political candidates fiercely compete in local elections and the
elections produce very close results between the strongest political parties.

 Our findings are important for considerations of prospective changes in the Czech
electoral system and regulation of political parties.

2 This IDEA study received support from the research programme Strategy AV21 of the Czech Academy
of Sciences. The study uses more detailed findings published in the academic paper: “Political Rent-
Seeking in Public Procurement: Evidence from the Entry of Political Challengers at Electoral Thresholds“.

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