Competing for Public Procurement Contracts: When Do Firms Benefit from Campaign Contributions?

This paper examines whether establishing private-public ties via campaign contributions to elected candidates becomes a valuable strategy in the market for public procurement contracts. To identify the additional returns provided by elected politicians to contributing firms, we implement a regression discontinuity design in the context of close elections for state-level legislative seats across eight states in Brazil. Comparing marginally elected candidates to marginally non-elected candidates for legislative seats, we find that elected candidates provide between 2.2 to 13.1 times higher value in public contracts to their average contributing firm when compared to non-elected candidates. However, we find that only companies tied with politicians that have access to individuals with experience about the public bureaucracy enjoy those additional public contracts. This result unveils that a key boundary condition for elected candidates to help their donors to obtain public contracts is to have access to staff with large experience working inside the state-level bureaucracy. This suggests that access to bureaucratic expertise is a critical condition for private-public ties to become a source of competitive advantage in the market for public procurement contracts.