Working Paper: NBER ID: w30948
Authors: Catherine Wolfram; Edward Miguel; Eric Hsu; Susanna B. Berkouwer
Abstract: There is limited causal evidence on the effects of different public procurement regulations on project quality and value-for-money for projects funded by national governments and foreign aid donors. This paper uses policy and experimental variation to study how two key contracting features—namely, contract bundling and monitoring—affect outcomes of a large economic development project. We leverage an unusual feature of Kenya’s nationwide electrification program: the quasi-random allocation of multilateral funding sources across nearby villages. African Development Bank (AfDB) projects used bundled contracts while the World Bank (WB) employed unbundled contracts together with strengthened inspections. To measure impacts, we collect on-the-ground engineering assessments, power quality data, household surveys, and analyze original contracts. The analysis suggests a stark trade-off: WB procedures delayed construction completion by 16 months relative to AfDB sites but improved construction quality by a sizeable 0.6 standard deviations. To disentangle the effects of contract bundling versus monitoring, we conducted randomized audits that enhanced monitoring. The audits improve household connectivity, network size, and voltage at AfDB sites, but have no impact at WB sites, suggesting monitoring and unbundling contracts may be substitutes. Given the apparent trade-off, we investigate how net benefits depend on policymaker time preferences and infrastructure longevity.
Keywords: public procurement; contract bundling; monitoring; Kenyan electrification
JEL Codes: D73; F35; H5; L94; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| World Bank (WB) procedures (F33) | construction quality (L74) |
| World Bank (WB) procedures (F33) | construction completion time (L74) |
| Randomized audits at AFDB sites (M42) | construction outcomes (L74) |
| Randomized audits at WB sites (C90) | construction outcomes (L74) |
| Average cost per new household connection at WB sites (L95) | average cost per new household connection at AFDB sites (O55) |