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CHAPTER 4. YEAR-END SPENDING 176
more recently originated projects are significantly more likely to be in our sample.
Our sample contains 85 percent of the total spending on projects that originated in
2007 or later and only 28 percent of the spending on projects that originated before
this date.
A simple way to assess whether there is selection is to estimate the model on
samples split into earlier and later years. A difference in the coefficient of interest
across samples, given the assumption that there is no time trend in the effect, would
be indicative of selection bias. Given this assumption, however, we can estimate the
parameter of interest exactly by using the date of project origination to identify a
selection correction term. Column (6) implements this strategy, showing estimates
from a standard Heckman selection model where the year or origination is excluded
from the second stage. The results show a larger effect than the corresponding OLS
estimate, but the lack of precession means that we cannot rule out that the effects
are the same. 19 The negative coefficient on the selection term, although statistically
indistinguishable from zero, suggests that lower quality projects are on net more likely
to remain in the sample over time.
4.4.5 Why Are Year End Contracts of Lower Quality?
The results from the I.T. dashboard show that, consistent with the predictions of our
model, year end spending is of lower quality than spending obligated earlier in the
year. 20 Our model posited two channels: agencies may save low priority projects for
the end of the year and undertake them only if they have no better uses for the funds,
and the high volume of contracting activity at the end of the year might allow for
less management attention per project.
19 Consistent with this finding, OLS estimates on a sample split in 2007 show a larger point estimate
in the later years, but we cannot reject the hypothesis that the coefficients are the same.
20 In addition to the last week of the year results described above, we have also examined last
month of the year spending and find that spending in the balance of the last month of the year is of
moderately lower quality than that in the first 11 months of the year. We have also examined the
quality of first week of the year spending (which also spikes). The point estimate for the first week
of the year suggests somewhat higher spending quality, but the odds ratio difference from 1.0 is not
statistically significant.