5/ Finally, we highlight the adaptability of politically connected firms to exploit regulatory loopholes and misuse discretion.

4/ Additional analysis on firms productivity suggest that politically connected firms are just as productive as non-connected firms.
We interpret this bureaucrats using discretion as a screening tool to identify productive, reliable suppliers, reducing information asymmetry and transaction costs.

3/ Results show that under strict rules, low discretion, there’s an increase in competition measured by the number of bids.
However, when rules are less strict, high thresholds, and bureaucrats have more discretion, fewer bids occur when politically connected firms win.

2/ We implement a Regression Discontinuity Design (RDD) with multiple scores:
Time dimension: cutoff = date when the regulation changed
Contract value dimension: cutoff = procurement threshold defined by the regulation

1/ Our study shows that bunching around procurement thresholds is evident when rules are strict, when bureaucratic discretion is limited by low thresholds.
When rules are lax, higher thresholds, bunching dissipates. Notably, bunching is more pronounced when the winning firm is politically connected.