Public investments and election cycle - microeconomic analysis

• Thesis title in Czech: Veřejné zakázky a volební cyklus - mikroekonomická analýza
• Thesis title in English: Public investments and election cycle - microeconomic analysis
• Key words: public procurement, political cycyle
• English key words: public procurement, political cycyle
• Academic year of topic announcement: 2018/2019
• Thesis type: diploma thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: PhDr. Mgr. Jiří Skuhrovec, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 23.01.2019
• Date of assignment: 23.01.2019
• Date and time of defence: 15.09.2020 09:00
• Venue of defence: Opletalova - Opletalova 26, O314, Opletalova - místn. č. 314
• Date of electronic submission: 30.07.2020
• Date of proceeded defence: 15.09.2020
• Opponents: doc. PhDr. Martin Gregor, Ph.D.

Guidelines

The database of public procurements from Econlab database will be provided as a data source. The source is basically the Bulletin of Public Procurements under the Information System on Public Procurements and eventually also the Registry of contracts can be used for the small-scale procurements.
The source of the results about the election will be the data from the Czech Statistical Office.
We also need the information about the elected mayors (or coalitions) which can be found on the municipality’s websites. We use the materials from the city’s assembly in September 2018 to find out who the mayor was in the city before the 2018’s election. Then we find the party of the mayor a search the election results in 2014 and 2018 and see if the mayor’s party improve or worsen its election results.

References

Skuhrovec, J, & Soudek J. (2015). zIndex – Benchmarking Municipalities in Public Procurement.

Skuhrovec, J. (2015). Studie: zakázky s jedinou nabídkou v roce 2015.

Matějová, L. (2016). Political business cycle in the Czech Republic: case of municipalities.

Fiva, J. H., & Natvik, G. J. J. (2009). Do re-election probabilities influence public investment?.

Goeminne, S., & Smolders, C. (2014). Politics and public infrastructure investments in local governments: empirical evidence from Flemish municipalities (1996–2009). Local Government Studies, 40(2), 182-202.

Orair, R. O., Gouvêa, R. R., & Leal, É. M. (2014). Political electoral cycles and public investments in Brazil.

Gonçalves, L. G., Funchal, B., & Bezerra Filho, J. E. (2017). A influência dos ciclos políticos nos investimentos públicos em infraestrutura: um estudo nos estados brasileiros no período de 2003 a 2014. Revista de Administração Pública, 51(4), 462-481.

Azzimonti, M. (2015). The dynamics of public investment under persistent electoral advantage. Review of Economic Dynamics, 18(3), 653-678.

Dias, B. P., Nossa, V., & Monte-Mor, D. S. (2018). O investimento público influencia na reeleição? Um estudo empírico nos municípios do estado do Espírito Santo. Revista de Administração Pública, 52(5), 880-898.

Portal, V. C. P. Politics and investment: Examining the territorial allocation of public investment in Greece.

Preliminary scope of work

The objective of the paper is to analyse the behaviour of the public authorities (based on the expectation of re-election to the office). We want to figure out if spending patterns change before/during the election time (more public procurements, public procurements of longer duration, more costly public procurements, lower competition in the procurements...). We create 2 groups: mayors who got re-elected and mayors who did not. Then we compare these 2 groups a see how their public spending differs.
Our motivation is to show that re-elected mayors spend the money more wisely (do not create doubtful procurements).
We see the mayor as an agent who maximizes his profit from the public function. We describe his behaviour in two periods. Firstly, if the mayor has good chance for re-election (connected with expected lower but long-term profit from the function) then he is risk-averse mayor and he is making good policy. On the other hand, if he is not that good during his administration (lower popularity than in the beginning, etc.) then he become risk-free mayor (situation of “no tomorrow”) because he suspect that he will not be re-elected. Then he maximizes the spendings with high level of discretion (these are the procurements which are mentioned in the hypotheses bellow). It is more valuable for him but also more risky but that is not important for him because he will not be probably re-elected.
We want to verify following hypotheses:
1. Before/during the election time there is an increase in small-scale contracts.
2. Before/during the election time there is an increase in soft services purchases.
3. Before/during the election time there is an increase in awards with zero or small competition.
4. Before/during the election time there is an increase in awards towards politically connected firms.
5. Before/during the election time there is an increase in long-term projects.

Preliminary scope of work in English

The objective of the paper is to analyse the behaviour of the public authorities (based on the expectation of re-election to the office). We want to figure out if spending patterns change before/during the election time (more public procurements, public procurements of longer duration, more costly public procurements, lower competition in the procurements...). We create 2 groups: mayors who got re-elected and mayors who did not. Then we compare these 2 groups a see how their public spending differs.
Our motivation is to show that re-elected mayors spend the money more wisely (do not create doubtful procurements).
We see the mayor as an agent who maximizes his profit from the public function. We describe his behaviour in two periods. Firstly, if the mayor has good chance for re-election (connected with expected lower but long-term profit from the function) then he is risk-averse mayor and he is making good policy. On the other hand, if he is not that good during his administration (lower popularity than in the beginning, etc.) then he become risk-free mayor (situation of “no tomorrow”) because he suspect that he will not be re-elected. Then he maximizes the spendings with high level of discretion (these are the procurements which are mentioned in the hypotheses bellow). It is more valuable for him but also more risky but that is not important for him because he will not be probably re-elected.
We want to verify following hypotheses:
1. Before/during the election time there is an increase in small-scale contracts.
2. Before/during the election time there is an increase in soft services purchases.
3. Before/during the election time there is an increase in awards with zero or small competition.
4. Before/during the election time there is an increase in awards towards politically connected firms.
5. Before/during the election time there is an increase in long-term projects.