The impact of e-procurement on institutional quality

Abstract

We examine the contribution of e-procurement to the institutional quality. To this end, we exploit the early adoption of large-scale e-procurement platforms in three EU countries to consistently estimate the effect of procurement policy change on the institutional quality. Our identification strategy relies on the institutional quality trends similarity between early-adopting countries and the rest of the world and uses a battery of covariates to match the treated and control group to parse out the level of early-adopters’ institutional quality had the e-procurement not been implemented. Drawing on a large sample of 108 countries for the period 1996-2017, our synthetic control and difference-in-differences estimates indicate significant improvements in public sector efficiency and rule of law in the countries with a high-level of pre-reform institutional quality and a pervasive deterioration in the ability to control corruption and quality of regulation in the setting with lower pre-reform institutional quality. The estimated effects of adopting e-procurement on institutional quality are robust to a number of specification checks, treatment sensitivity analyses and donor sample selection issues.