Working Paper: NBER ID: w21186
Authors: Marian Moszoro; Pablo T. Spiller; Sebastian Stolorz
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 relational private contracts. 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 attempting to lower third-party opportunistic challenges.
Keywords: public contracts; contract rigidity; political contestability; textual analysis; algorithmic data reading
JEL Codes: D23; D73; D78; H57; K23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased political contestability (D72) | more rigid public contracts (H57) |
| public contracts are lengthier (H57) | private contracts (L14) |
| public contracts contain more rigidity clauses (D86) | private contracts (L14) |
| public contracts are renegotiated through formal processes (L33) | more amendments compared to private contracts (K12) |
| amendments in public contracts include more rigidity clauses (H57) | reinforcement of hypothesis about political contestability and contract features (D72) |