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Summary A model of entrepreneurial choices in an economy with a corrupt public procurement sector is built, providing predictions along two dimensions. First, corrupt public institutions operate by offering contracts without competition and more corrupt entities channel larger share of their budget in this way. Second, these firms enjoy extra returns, so that procurement related activities attract the best entrepreneurs. A large-scale microeconomic database, including all public procurement operations over a 4-year period in Paraguay, amounting annually to approximately 6% of the country’s GDP, is then used to corroborate these predictions. [ABSTRACT FROM AUTHOR]

Abstract: Numerous renegotiations have plagued water and transport concession contracts in Latin America. Using a panel dataset of over 300 concession contracts from Latin America between 1989 and 2000, we show that country-level corruption is a significant determinant of these renegotiations and that the effect of corruption varies depending on the type of renegotiations considered. While a more corrupt environment clearly leads to more firm-led renegotiations, it significantly reduces the incidence of government-led ones. The paper then discusses and tests the likely channels through which these different effects of corruption arise, looking in particular at the interactions between country-level corruption and relevant microeconomic institutions. [Copyright &y& Elsevier]

This paper challenges the conventional wisdom that giving voters more power – both formally through the use of more "open" electoral systems and informally through easier access to information on politicians' wrongdoings – will necessarily result in them voting corrupt politicians out of office. Focusing on a comparison between closed-list and open-list proportional representation systems, we theoretically show that opening the lists is likely to generate a large shift of vote shares in favor of the incumbent parties, which in many countries happen to be the most corrupt. We design a survey experiment to test these predictions in Paraguay and find strong supporting evidence. We do not find in our context that the lack of information is a major obstacle preventing voters from voting out corrupt politicians; if anything, under the more open system, supporters of the incumbent party tend to cast more votes for politicians with a recent history of corruption. [ABSTRACT FROM AUTHOR]