All you need is political love? Assessing the effects of partisan favouritism in Croatia's public procurement

This paper discusses the political donations -public procurement interplay in Croatia. It rests on a unique and comprehensive hand-collected firm-by-tender micro-level dataset that enables the assessment of partisan favouritism in procuring goods, services and work by the Croatian gov-ernment in the 2012-2018 period. Main results show that (i) political donations pay off and a ten percent increase in political donations leads to an increase in public procurement revenues of 5.7%; (ii) political disloyalty, i.e. switching donations from centre-right to centre-left parties or vice versa, does not reimburse; (iii) big firms in Croatia are big enough to bid lower prices and/or contract better terms, such that they don't need favouritism in public procurement awards; and (iv) political contributions ex-post election (2016-2018) increase procurement revenues of donating firms by 27%, and firms connected to the losing party exhibit a drop in procurement revenues of more than 12% compared to the ex-ante elections.