Many Problems, One Solution

Leo Tolstoy showed great insight into public procurement efficiency when he opened his novel Anna Karenina with the line, “All happy families are alike; each unhappy family is unhappy in its own way."

We put it to the test in new research on the efficiency of public procurement in 187 countries. This research, done jointly with professors Edward Glaeser and Andrei Shleifer at Harvard University, aims to document patterns in the regulation of public works contract awards.  We found that in this area, at least, all happy countries – comparable to very large families – are alike.

First, we collected data on the time efficiency of the public procurement process, as detailed in a previous blog. Second, these data were correlated with the time efficiency of other indicators of the World Bank’s Doing Business project. Third, taking income per capita as a good proxy for happiness at the country level, consistent with a large body of economics literature, the sample was divided into three groups: low- and lower middle-income, middle-income, and high-income countries, using the standard World Bank classification.

In high-income countries, i.e. happy families, the correlation between different measures of time efficiency - for example procuring public works and resolving insolvency - is quite high, above 0.5. This finding suggests that when a rich country is efficient in public procurement, it is also efficient in resolving insolvency (figure 1).

Figure 1

Source: Doing Business database.

In contrast, the correlation in low-income countries, i.e. unhappy families, is smaller and in most cases insignificant, suggesting that different factors may be driving differences in the time it takes to complete various services for private businesses. As an example, Figure 2 shows the relationship between the time to procure public goods and the time to resolve insolvency.

Figure 2

This pattern may be due to the need for low-income countries to expand online services. In other words, many problems in public administration in these countries may be resolved with one solution: e-services. The Doing Business study lists developing countries that have succeeded in such improvements: Georgia, Rwanda and Togo to name three. Their experience may provide good examples for others to follow.