The scope and limits of accounting and judicial courts intervention in inefficient public procurement

Estache, Antonio; Foucart, Renaud

Abstract

Cost inefficiencies in public procurement tend to come from two sources: corruption (moral hazard) and incompetence (adverse selection). In most countries, audit authorities are responsible for monitoring costs but do not distinguish both sources of inefficiency in their audits. Judicial courts typically rely on these cost audits, but only sanction corruption. In a model of public procurement by politicians, we study how the respective quality of the two courts affects corruption as well as cost efficiency. We find that while better courts have the direct effect of decreasing corruption, they may have a negative indirect effect on the abilities of the pool of politicians, so that the net effect on cost efficiency is ambiguous.

Citation

Estache, A., & Foucart, R. (2018). The scope and limits of accounting and judicial courts intervention in inefficient public procurement. Journal of Public Economics, 157, https://doi.org/10.1016/j.jpubeco.2017.11.008

• Journal Article Type: Article
• Acceptance Date: Nov 30, 2017
• Online Publication Date: Dec 6, 2017
• Publication Date: Jan 31, 2018
• Deposit Date: Feb 6, 2018
• Publicly Available Date: Dec 7, 2018
• Journal: Journal of Public Economics
• Print ISSN: 0047-2727
• Electronic ISSN: 0047-2727
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 157
• DOI: https://doi.org/10.1016/j.jpubeco.2017.11.008
• Keywords: Moral hazard; Adverse selection; Procurement
• Public URL: https://nottingham-repository.worktribe.com/output/907727
• Publisher URL: https://doi.org/10.1016/j.jpubeco.2017.11.008
• Contract Date: Feb 6, 2018