Budgetary Rent Extraction in Public Investment: Evidence From Ukraine’s Infrastructure Sector

The article investigates budgetary rent extraction in Ukraine’s infrastructure sector through a multi-stage natural experiment built around institutional shocks in the ProZorro e-procurement system. Using a difference-indifferences design applied to a large panel of contracting authorities in road construction and housing & utilities, the study evaluates how strengthened disclosure rules, automated red-flag algorithms, and intensified oversight affected procurement behavior and fiscal outcomes. The results show that transparency-enhancing interventions significantly reduced systematic overpricing, limited bidder concentration, increased effective competition, and curtailed post-award price escalations. Consequently, the rent component embedded in infrastructure contracts contracted, increasing the real value of delivered public investment. The analysis further demonstrates that the strongest improvements occurred in segments with initially weak transparency, confirming that enforcement reforms mitigated fiscal losses in the highest-risk institutional environments. Beyond these direct effects, the study reveals important dynamic adjustments: part of the rent displaced from procurement reappears at planning and execution stages, highlighting the multi-stage nature of corruption in public investment. This finding indicates that procurement-focused reforms alone cannot eliminate rent extraction but rather reshape its distribution along the budget cycle. Methodologically, the integration of experimental variation, administrative procurement data, and risk-based enforcement indicators provides a scalable framework for diagnosing rent patterns in infrastructure spending. Overall, the evidence shows that targeted transparency and enforcement measures substantially improve allocative efficiency and strengthen the effective fiscal multiplier, but only when embedded within broader institutional reforms that address planning, allocation, procurement, and execution simultaneously. These insights are directly relevant for designing governance architectures for Ukraine’s forthcoming reconstruction.