Effect of Institutions: Analysis of Japanese Municipal Public Procurement

Using data from Japanese municipalities, this article analyzes the impact of institutional reform processes on the average winning bid for municipal public procurement. The results are (1) the general competitive bidding method led to a decrease in the average winning bid, and (2) bidding reform itself led to a decrease in the average winning bid. The former is a factor that results from the competition function, and the latter is an authority's commitment factor, which is rooted in an aggressive atmosphere for efficiency through the reformed bidding system; this factor is similar to the "Hawthorne Effect," in which changes in businesses' behavior during the course of a particular term may be related only to the special social situation, and social treatment that they encountered.