Fazekas, M., Ferrali, R., Wachs, J. (2018): Institutional quality, campaign contributions, and favouritism in US federal government contracting. GTI-WP/2018:01, Budapest: Government Transparency Institute.
The corrupting power of money in US politics has long been debated with emerging evidence pointing out that campaign contributions help funnel money to politically connected companies. However, it is yet unclear how exactly such mechanisms might work and what are the curbs on politically driven contracting. To address these gaps we compile the full dataset of published federal contracts and registered campaign contributions for 2004-2015, linked to each other on the company level. We develop corruption risk indices in government contracting which capture tendering practices and outcomes potentially characterised by favouritism. Using contract-level regression models with a wide range of fixed effects, we find that a large increase in donations going from 1 thousand USD to 1 million USD increases risks by a little over one tenth of a red flag on a 0-7 red flag scale. The effects are largely partisan, that is donating to the governing party matters the most. Moreover, company donations can influence tendering corruption risks most where the federal agency has a low baseline institutional quality: in such cases, large donations to the president’s party (749,000 USD or more) add 2.6 red flags.