Political Contestability and Public Contract Rigidity: An Analysis of Procurement Contracts
20 Pages Posted: 11 Apr 2019
Date Written: Summer 2019
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: contractual rigidity, political contestability, procurement
JEL Classification: D23, D72, D73, D78, H57
Suggested Citation: Suggested Citation