Browsing by Subject "Procurement"

Acts of corruption at all levels have serious negative consequences for governments' finances and citizens' standards of living. Yet, corruption is largely sustained by norms and behavior (e.g., favoring one's family, reciprocity) that would be considered pro-social, were it not for the fact that they involve the misuse of public funds and the abuse of public office. In this dissertation I explore two themes that underpin this contradiction. First, citizen-bureaucrat relations, and how individuals, in their roles as ordinary citizens or managers of firms, use connections to elected officials and bureaucrats to obtain privileged access to public services or public procurement contracts. Second, the link between bureaucratic capacity and corruption. Chapter 2 proposes a novel explanation for citizen engagement in collusive forms of petty corruption. It is rooted in the social context in which citizen-bureaucrat interactions take place. I argue that social proximity and network centrality provide the two key enforcement mechanisms that sustain favor exchanges among socially connected individuals. Bribery, as a collusive arrangement between a citizen and a public official, relies on the same enforcement mechanisms. Using an original dataset from a household survey conducted in Guatemala, the analysis shows that social proximity and centrality allow citizens to obtain privileges through implicit favor exchanges and illicit payments. These effects go beyond simply increasing the frequency of contact with public officials and are not driven by better access to information about the bribery market. Chapter 3 examines how exposure to, or engagement in different forms of petty corruption transforms into overall assessments of state capacity. In it, I argue that two components of corrupt transactions, namely whether a payment is required and whether an illegal advantage is granted, affect citizen’s perceptions of state capacity in different ways. The act of paying a street-level bureaucrat informs a citizen of the state’s inability to prevent its workers from engaging in corruption. In contrast, the experience of obtaining illicit advantages informs a citizen of the state’s ability to provide expedited service delivery. To test the implications of this argument I rely, once again, on survey data from Guatemala, and find that exposure to extortion by street-level bureaucrats has a negative effect on individuals’ perceptions of the government’s capacity to provide services. Furthermore, obtaining illicit advantages through favor exchanges positively impacts perceptions of state capacity, but engaging in bribery has no effect on such perceptions since the effect of making a payment offsets that of receiving an advantage. Finally, Chapter 4 explores the dynamics of political favoritism in public procurement. In this chapter, I draw a sharp distinction between the extent to which a bureaucracy is politically controlled and its technical capacity. I argue that in politically controlled bureaucracies, stronger technical capacity facilitates corruption. In such contexts, more capable bureaucrats utilize their skills to shield favored firms from competition using complex strategies that minimize the risk of detection. I test the argument on a novel dataset of 54,623 municipal contracts in Guatemala and 21,631 firm-politician ties. In line with the argument, I find that more capable bureaucracies increase the likelihood of well-connected firms winning contracts through less competitive processes, even after controlling for a firm’s experience, size and previous business with the municipality. Furthermore, my analysis suggest that high-skilled bureaucrats rely on tender manipulation to favor connected firms.

This dissertation collects work concerning the way individuals deal with imperfect information, both related to their knowledge of themselves and of others. The second chapter shows that bounded rationality, in the form of limited knowledge of utility, is an explanation for common stylized facts of prospect theory like loss aversion, status quo bias and non-linear probability weighting. Locally limited utility knowledge is considered within a classical demand model framework, suggesting that costs of inefficient search for optimal consumption will produce a value function that obeys the loss aversion axiom of Tversky and Kahneman (1991). Moreover, since this adjustment happens over time, new predictions are made that explain why the status quo bias is reinforced over time. This search can also describe the behavior of a consumer facing an uncertain future wealth level. The search cost justifies non-linear forms of probability weighting. The effects that have been observed in experiments will follow as a consequence.

The third chapter looks to understand how firms create and maintain long term relationships with consumers, or how procurement relations evolve over time, by studying a dynamic variant of the classical two-type-buyer contract in mechanism design. It is less trivial and more interesting if the utility determinant (or utility type) is not fixed or completely random, and fair assumptions are that it is either stochastic, or given by a distribution whose parameters are common knowledge. The first approach is that of Battaglini (2005), while the second is pursued in this paper. With two possible types of buyers, the buyer more likely to have a high utility type will receive the first-best allocations, while the other will receive the first best only if he has the high utility type.

The last chapter analyzes a dynamic procurement setting with promise keeping, where two firms (agents) with private information on their costs contract competitively with a principal. To this end, two models are proposed and the optimal allocations are determined. The agents face liquidity constraints, which induce distortions when high marginal costs are reported. We deduce that the principal uses promised utilities to incentivize the agents, which act as state variables in the recursive maximization problem. High cost types are allocated less than efficient quantities and the inefficiency of the allocation is relieved as the promised utilities increase.

Lao People's Democratic Republic (Laos) faces a unique set of supply chain challenges for HIV and malaria control. Although the HIV and malaria prevalence rates are relatively low, the country has struggled to maintain an adequate supply of HIV and malaria commodities throughout the country, resulting in delays or stock outs of key commodities for both diseases. Supply chains in developing countries are often strained and weak, but creating sustainable procurement and supply chain management (PSM) processes is vital to the overall success of a county's health system. Poor PSM practices are reflective of and reinforced by a weak health system, and Laos, like other low-income countries, is confronting many PSM challenges. The Global Fund to Fight AIDS, Tuberculosis, and Malaria heavily supports both the HIV and malaria programs in Laos and is now placing increased emphasis on improving PSM processes in grant recipient countries. Research on supply chains in developing countries is scarce and in-depth, country-level analysis of challenges and barriers to successful PSM is essential to improving the long-term sustainability of health systems. The aim of this research is to improve supply chain management for HIV and malaria control programs. The specific objectives are:

1. To identify barriers and bottlenecks through a situation analysis of Laos' supply chains for national HIV/AIDS and malaria control programs.

2. To analyze factors affecting HIV/AIDS and malaria supply chains in Laos.

3. To suggest policy recommendations for the WHO, the Global Fund to Fight AIDS, Tuberculosis and Malaria, the Lao Ministry of Health, and other institutional or organizational stakeholders for improved supply chain management and function.

Qualitative research was conducted in Vientiane Capital and Savannakhet Province in May-July 2012 and included 41 key-informant interviews, document review, and informal observations. Data collection and analysis were primarily guided by the USAID