Current EOPP Research:
Active and Passive Waste in Government Spending: Evidence from a Policy Experiment
Oriana Bandiera and Andrea Prat (with Tomasso Valleti, Imperial College
)
Abstract:
We propose a distinction between active waste (a situation where the presence
of waste benefits the public decision maker, as in the case of bribery)
and passive waste (pure inefficiency, possibly due to excessive red tape). We
analyze purchases of several standardized goods by over 200 Italian public
bodies and exploit a policy experiment that introduced a national procurement
agency. A revealed preference argument implies that the decision to buy
from the new procurement agency rather than from traditional suppliers can
be used to distinguish between active and passive waste. Our results indicate
that: (i) Different public bodies pay widely different prices for observationally
equivalent goods, with centralized bodies paying on average at least 25% more
than semi-autonomous bodies; (ii) Price differences are mostly due to passive
rather than active waste — on average passive waste accounts for 79% to 92% of
estimated waste; (iii) There is no trade-off between passive and active waste.
Related paper
Active and Passive Waste in Government Spending: Evidence from a Policy Experiment mimeo, LSE
