Contractual Rigidity and Political Contestability: Revisiting Public Contract Renegotiations

30 Pages Posted: 22 Feb 2021 Last revised: 8 May 2021

See all articles by Jean Beuve

Jean Beuve

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES)

Marian W. Moszoro

Warsaw School of Economics (SGH); International Monetary Fund (IMF); George Mason University - Department of Economics; George Mason University - Interdisciplinary Center for Economic Science (ICES)

Pablo T. Spiller

University of California, Berkeley - Business & Public Policy Group

Date Written: February 2021

Abstract

We present a model of public procurement in which both contractual flexibility and political tolerance for contractual deviations determine renegotiations. In the model, contractual flexibility allows for adaptation without formal renegotiation while political tolerance for deviations decreases with political competition. We then compare renegotiation rates of procurement contracts in which the procurer is either a public administration or a private corporation. We find robust evidence consistent with the model predictions: public-to-private contracts are renegotiated more often than comparable private-to-private contracts, and that this pattern is more salient in politically contestable jurisdictions. The frequent renegotiation of public contracts results from their inherent rigidity and provides a relational quality of adaptability to contingencies in politically contestable environments.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Beuve, Jean and Moszoro, Marian W. and Spiller, Pablo T., Contractual Rigidity and Political Contestability: Revisiting Public Contract Renegotiations (February 2021). NBER Working Paper No. w28491, Available at SSRN: https://ssrn.com/abstract=3790229

Jean Beuve (Contact Author)

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES) ( email )

106-112 Boulevard de l'hopital
106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647
France

Marian W. Moszoro

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

HOME PAGE: http://economics.gmu.edu/people/mmoszoro

George Mason University - Interdisciplinary Center for Economic Science (ICES) ( email )

400P Truland Building
George Mason University
Fairfax, VA 22030
United States

Pablo T. Spiller

University of California, Berkeley - Business & Public Policy Group ( email )

545 Student Services Building
Berkeley, CA 94720
United States
510-642-1502 (Phone)
510-642-2826 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
24
PlumX Metrics