Job Market Paper

Detecting Auctioneer Corruption: Evidence from Russian Procurement Auctions,
with Pasha Andreyanov and Alec Davidson

This paper develops a novel method for detecting auctioneer corruption in first-price sealed-bid auctions. We study the leakage of bid information by the auctioneer to a preferred bidder. We construct a formal test for the presence of bid-leakage corruption and apply it to a novel data set of 4.3 million procurement auctions in Russia that occurred between 2011 and 2016. With bid leakage, the preferred bidder gathers information on other bids and waits until the end of the auction to place a bid. Such behavior creates an abnormal correlation between winning and being (chronologically) the last bidder. Informed by this fact, we build several measures of corruption. We document that more than 10% of the auctions were affected by bid leakage. Our results imply that the value of the contracts assigned through these auctions was $1.2 billion over the six-year study period. We build a model of bidding behavior to show that corruption exerts two effects on the expected prices of the contracts. The direct effect inflates the price of the contract. The indirect effect reduces the expected price, since honest bidders are trying to undercut corrupt bidders. We find both effects in the data, with the direct effect being more pronounced.

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Working Papers

What is the effect of conflict on trade transactions between firms? This paper examines trade in the aftermath of the Russian-Ukrainian conflict (2014–). The geographic concentration of fighting in a few regions allows us to study the indirect effects of conflict on trade, as opposed to the direct effects of violence or trade embargoes. We employ a highly granular transaction-level dataset for the universe of import and export transactions in Ukraine and find that firms from more ethnolinguistically Ukrainian counties experienced a deeper drop in trade with Russia relative to the firms in more Russian counties. The richness of our panel data allows us to rule out mechanical explanations, such as increased transportation costs and bans on certain products. Instead, we focus on two ethnic-specific explanations: a rise in animosity and a decrease in trust. In a stylized model of trade with asymmetric information, we show that one can distinguish these two mechanisms based on whether the effect is more pronounced for homogeneous or non-homogeneous goods, the latter pointing to the trust mechanism. Empirically, we show that the trade of relation-specific goods, defined as in Nunn (2007), have not changed differentially across ethnic lines and that our difference-in-differences results are fully driven by homogeneous products. Hence, we find little evidence in support of a shock to trust. We then use survey data to show that inter-ethnic animosity has indeed escalated in the aftermath of the conflict. Overall, our results contribute to the burgeoning literature on conflict, ethnic divisions, and economic performance by providing the first micro-level evidence on the indirect effects of conflict on trade between firms.

Cartels and Shill Bidders in Procurement Auctions: Detection and Price Implications [available upon request],
with Pasha Andreyanov and Alec Davidson

We use a unique data set of Russian procurement auctions to examine the role of shill bids in bidding cartels empirically. We use information on the timing of bids to identify simultaneous bids in first-price sealed-bid auctions, and show that up to 20% of the auctions out of four million is subject to this behavior. We show that prices in the auctions with simultaneous bidding are 10% higher than in auctions without collusion. Finally, we link bidders to firms' balance sheets to detect fake companies created solely for shill bidding as opposed to functional members of cartels. Our paper is the first to show how one can enhance methods of collusion detection by using the data on timing of bids.

with Ruben EnikolopovMaria PetrovaKonstantin Sonin and Alexey Zakharov
Proceedings of the National Academy of Sciences of the United States of America, Vol. 110, No. 2 (January 8, 2013), pp. 448-452

Electoral fraud is a widespread phenomenon, especially outside the developed world. Despite abundant qualitative and anecdotal evidence of its existence from around the world, there is very limited quantitative evidence on the extent of electoral fraud. We exploit random assignment of independent observers to 156 of 3,164 polling stations in the city of Moscow to estimate the effect of electoral fraud on the outcome of the Russian parliamentary elections held on December 4, 2011. We estimate the actual share of votes for the incumbent United Russia party to be at least 11 percentage points lower than the official count (36% instead of 47%). Our results suggest that the extent of the fraud was sufficient to have had a substantial impact on the outcome of the elections; they also confirm that the presence of observers is an important factor in ensuring the integrity of the procedure.

Work in Progress

Firms and Public Bodies as Determinants of Public Procurement Prices,

To what extent do firms and public bodies contribute to prices of public procurement contracts? I adopt two approaches from the literature on firm and worker unobserved heterogeneity: a classic approach of Abowd, Kramarz, and Margolis (1999), and a more recent approach of Bonhomme, Lamadon, and Manresa (2017) that introduces nonlinear interactions. Both methods allow estimating the distributions of two-sided heterogeneity of public bodies and firms from Russian procurement data.