Does E-Procurement Deter Corruption? Evidence from a Quasi-Experimental Study

• In Event: The Trade-Offs of Contracting in the Public Sector

Abstract

Public procurement, representing approximately $11 trillion of global GDP, plays a vital role in governance but remains highly vulnerable to corruption (Bosio & Djankov, 2020). Traditional procurement systems often suffer from weak oversight, limited transparency, and ineffective enforcement strategies (Rose-Ackerman, 1999; Olken, 2007), creating fertile ground for rent-seeking behaviors. As a result, bribes are estimated to account for 8–25% of procurement value, significantly undermining public sector efficiency and integrity (Bosio, 2021). In response, e-procurement systems have emerged as a promising innovation aimed at enhancing transparency, reducing discretion, and strengthening accountability. Empirical studies have shown that e-procurement can effectively deter corruption in specific national contexts (Puspita & Gultom, 2024) or among firms operating across countries (Jiménez et al., 2022). However, the extent to which e-procurement effectively curbs corruption—particularly the mechanisms through which it operates and how its effects vary across different levels of democracy and income—remains insufficiently understood.Drawing on public choice theory—especially the notion that increased government disclosure raises the costs and lowers the expected benefits of corrupt behavior—this study posits that e-procurement adoption deters corruption by reshaping the incentive structures faced by public officials. Specifically, e-procurement is expected to increase the likelihood of detection and sanction, thereby discouraging illicit practices. Existing research suggests that e-procurement mitigates corruption by constraining bureaucratic discretion, enabling public access to procurement data, and promoting competitive bidding (Fazekas & Kocsis, 2020; Bosio, 2021). Moreover, the effect of e-procurement is likely to be conditioned by institutional context: stronger democratic accountability and decentralized governance may either amplify or diminish its deterrent effect, depending on how these factors influence oversight and enforcement.This study employs a quasi-experimental design using cross-country panel data. Adopting a staggered difference-in-differences approach, we apply both the estimator developed by Callaway et al. (2021) and a two-way fixed effects model to examine the impact of e-procurement adoption on corruption levels across 148 countries from 1990 to 2019. Corruption is measured using the Bayesian Corruption Index (BCI) developed by Standaert (2015), and data on e-procurement adoption are obtained from the World Bank. Preliminary results indicate that e-procurement adoption significantly reduces corruption across countries. However, subgroup analyses reveal that the deterrent effect is less pronounced in democratic and decentralized contexts, suggesting that institutional characteristics may mediate the effectiveness of digital procurement reforms.Beyond estimating the average treatment effect, this study further investigates the causal mechanisms underlying the observed relationship. By leveraging cross-national variation in government procurement expenditures and fiscal transparency, we explore how political accountability, bureaucratic capacity, and public access to procurement information shape the effectiveness of e-procurement. These findings contribute to a deeper understanding of how digital governance tools interact with institutional environments to influence anti-corruption outcomes.

Authors

• Tingzhong Huang, Fudan University
  Presenting Author

• Can Chen, Georgia State University
  Non-Presenting Co-Author