Working Paper: NBER ID: w28491
Authors: Jean Beuve; Marian W. Moszoro; Pablo T. Spiller
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.
Keywords: No keywords provided
JEL Codes: D23; D72; D73; D78; H57
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| contractual rigidity (D86) | frequency of public contract renegotiations (H57) |
| political contestability (D72) | frequency of public contract renegotiations (H57) |
| political competition (D72) | political tolerance for deviations (P37) |
| political tolerance for deviations (P37) | frequency of public contract renegotiations (H57) |
| contract rigidity (D86) | public-to-private contracts renegotiation frequency (L14) |
| public-to-private contracts renegotiation frequency (L14) | contract rigidity (D86) |