Political Contestability and Public Contract Rigidity: An Analysis of Procurement Contracts
Journal of Economics & Management Strategy (Forthcoming)
38 Pages Posted: 3 Mar 2016 Last revised: 15 Jun 2018
Date Written: June 5, 2018
Are public contracts less adaptable than private contracts? Using a comprehensive set of contracts for a standard product, we compare procurement contracts in which the procurer is either a public administration or a private corporation. We find that public-to-private contracts feature more rigidity clauses than private-to-private contracts and that the use of rigidity clauses in public contracts rises when political risks are more salient. We argue that a significant part of the increased rigidity of public contracts is a contractual adaptation to limit political hazards from political opponents and interested third parties.
Keywords: Procurement, Political Contestability, Contractual Rigidity
JEL Classification: D23, D72, D73, D78, H57
Suggested Citation: Suggested Citation