Do Information Frictions and Corruption Perceptions Kill Competition? A Field Experiment On Public Procurement in Uganda

We study whether information frictions and corruption perceptions deter firms from doing business with the government. We conduct two nationwide randomized controlled trials (RCTs) in collaboration with the national public procurement supervisory and anti-corruption agency in Uganda. The first RCT aims to increase firms’ information on available procurement opportunities, which is limited due to the lack of a centralized e- procurement system. We provide firms with direct and timely access to information about government tenders over a two-year period. The second RCT focuses on firms’ perceptions about the integrity of public entities, which we experimentally show are key drivers of firms’ participation in procurement. We provide firms with access to structured information on other firms’ perceptions and on anti-corruption audits. We find that increasing information on available procurement opportunities alone does not increase firm participation in public procurement. However, changing firms’ perceptions about the integrity of public entities increases firms’ total number of bids and total government contracts won. Based on our findings, our partner agency implemented several measures to further restore firms’ trust in public entities. Overall, our findings point to the limits of transparency reforms that aim to increase competition in public procurement without accounting for firms’ perceptions about government corruption and inefficiency.