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Rigidity of Public Contracts

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  • Moszoro, Marian W.
  • Spiller, Pablo T.
  • Stolorz, Sebastian

Abstract

We apply algorithmic data reading and textual analysis to compare the features of contracts in regulated industries subject to public scrutiny (which we call "public contracts") with contracts between non-governmental entities. We show that public contracts are lengthier and have more rule-based rigid clauses; in addition, their renegotiation is formalized in amendments. We also find that contract length and the frequency of rigidity clauses increases in political contestability and closer to upcoming elections. We maintain that the higher rigidity of public contracts is a political risk adaptation strategy carried out by public agents to lower the likelihood of success of politically motivated challenges from opportunistic third parties.

Suggested Citation

  • Moszoro, Marian W. & Spiller, Pablo T. & Stolorz, Sebastian, 2016. "Rigidity of Public Contracts," MPRA Paper 101575, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:101575
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    Cited by:

    1. Olga N. Balaeva & Andrei A. Yakovlev & Yuliya D. Rodionova & Daniil M. Esaulov, 2018. "Public Procurement Transaction Costs: A Country-Level Assessment Based On Microdata," HSE Working papers WP BRP 20/PSP/2018, National Research University Higher School of Economics.
    2. Joshua R. Bruce & John M. de Figueiredo & Brian S. Silverman, 2019. "Public contracting for private innovation: Government capabilities, decision rights, and performance outcomes," Strategic Management Journal, Wiley Blackwell, vol. 40(4), pages 533-555, April.
    3. Jean Beuve & Marian W. Moszoro & Stéphane Saussier, 2019. "Political contestability and public contract rigidity: An analysis of procurement contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(2), pages 316-335, April.
    4. Jean Beuve & Marian W Moszoro & Pablo T Spiller, 2023. "Doing It by the Book: Political Contestability and Public Contract Renegotiations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 39(1), pages 281-308.
    5. Marian W. Moszoro & Pablo T. Spiller, 2018. "Implications of Third Parties for Contract Design," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(1), pages 5-16, March.
    6. Abhay Aneja & Marian Moszoro & Pablo T. Spiller, 2015. "Political Bonds: Political Hazards and the Choice of Municipal Financial Instruments," NBER Working Papers 21188, National Bureau of Economic Research, Inc.
    7. Marian W. Moszoro & Pablo T. Spiller, 2019. "Political contestability and public contracting," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(5), pages 945-966, October.
    8. Olga Balaeva & Yuliya Rodionova & Andrei Yakovlev & Andrey Tkachenko, 2022. "Public Procurement Efficiency as Perceived by Market Participants: The Case of Russia," International Journal of Public Administration, Taylor & Francis Journals, vol. 45(16), pages 1156-1167, December.
    9. Díaz, Gonzalo Ruiz, 2022. "Private participation in government-led backbone network projects: Lessons from three Latin American experiments," Telecommunications Policy, Elsevier, vol. 46(8).
    10. José M. Alonso & Rhys Andrews, 2019. "Governance by targets and the performance of cross‐sector partnerships: Do partner diversity and partnership capabilities matter?," Strategic Management Journal, Wiley Blackwell, vol. 40(4), pages 556-579, April.

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    More about this item

    Keywords

    Transaction Costs; Public Contracting and Procurement; Political Economy; Regulated Industries;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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