The impact of political connections on public procurement: evidence from Portugal

Abstract

This paper uses the municipal elections of 2013 to infer the impact political connectionshave on public procurement. Obtaining government related contracts may be a possiblejustification for the increase in value that firms face when connected. Data on public con-tracts celebrated between 2009 and 2017 in all 308 Portuguese municipalities was combinedwith managers, politicians and companies’ financial information. Through a Difference-in-Differences strategy, a positive and significant impact was found: not only there is an increasein number, but also a rise in the volume of contracts celebrated by companies connected.This impact is extensible to firms connected with winning parties and the shift in value isamplified in procedures where companies can directly choose the contractor entity. Addi-tionally, effects are driven by companies placed in small councils and by those that contractabove the sample median.