Sweeping the Dirt Under the Rug: Measuring Spillovers from an Anti-Corruption Measure * Andrea Tulli University of Warwick November, 2019 Click here for the updated version Abstract Using data on Italian public procurement, I show that the implementation of a law enforcement measure on a municipal government has two effects on neighbouring mu- nicipalities. First, they increase the number of contracts under a threshold below which evidentiary requirements become less stringent, making it more difficult to prove any infraction. This response accounts for 1 percent of the yearly expenditure on large con- tracts. Second, they renegotiate fewer contracts, a practice that is often associated with corruption. The results suggest that, in response to law enforcement, local administrators exploit less monitored margins of the procurement process and engage less in activities that are signals of potential corruption so as to minimise scrutiny by law enforcement bodies. I provide evidence that this is indeed the case. Using a technique from natural language processing, I show that municipalities split large projects into contracts smaller than the threshold and the response occurs only in sectors that are more vulnerable to corruption (i.e. construction and waste management). * Special thanks to my supervisors Miguel Almunia, Michael Best, James Fenske and Carlo Perroni for their invaluable support. I am very grateful to Benjamin Chen, Rosetta Greco, Lucia Iannotta, Domenico Ma- nente, Giampaolo Sellitto and Monica Vici who helped me to collect the data and clarifying the institutional setting. I thank Arun Advani, Audinga Baltrunaite, Alessandra Casella, Luis Candelaria, Decio Coviello, Gi- anmarco Daniele, Francesco De Carolis, Lucie Gadenne, Francois Gerard, Jonas Hjort, Camilla Roncoroni, Gabriele Rovigatti and seminar participants at WEEE, University of Warwick, Columbia University, HEC University and Bocconi University for their insightful comments. All errors are responsibility of the author. Email: a.tulli@warwick.ac.uk. Website: https://sites.google.com/view/andreatulli/home. I gratefully acknowl- edge ESRC for financial support and data access from ANAC. 1