American Economic Review Vol. 99 No. 4 2009

Active and Passive Waste in Government Spending: Evidence from a Policy Experiment

Oriana Bandiera¹; Andrea Prat¹; Tommaso Valletti²

¹ Department of Economics, London School of Economics, Houghton Street, London, WC2A 2AE, UK. · ² Business School, Imperial College London, South Kensington Campus, London SW7 2AZ, UK, and Department of Economics, University of Rome “Tor Vergata”.

Abstract

We propose a distinction between active and passive waste as determinants of the cost of public services. Active waste entails utility for the public decision maker, whereas passive waste does not. We analyze purchases of standardized goods by Italian public bodies and exploit a policy experiment associated with a national procurement agency. We find that: (i) some public bodies pay systematically more than others for equivalent goods; (ii) differences are correlated with governance structure; (iii) the variation in prices is principally due to variation in passive rather than active waste; and (iv) passive waste accounts for 83 percent of total estimated waste.

DOI

10.1257/aer.99.4.1278

Volume

99

Issue

4

Pages

1278-1308

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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