Rigidity of Public Contracts

36 Pages Posted: 5 Jul 2013 Last revised: 4 Dec 2014

Marian W. Moszoro

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

Pablo T. Spiller

University of California, Berkeley - Business & Public Policy Group

Sebastian Stolorz

George Mason University - School of Policy, Government, and International Affairs; World Bank

Multiple version iconThere are 4 versions of this paper

Date Written: July 14, 2014

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, have more rule-based rigid clauses, and their renegotiation is formalized in amendments. We also find that contract length and the frequency of rigidity clauses increases in political contestability. We sustain that the higher rigidity of public contracts is a political risk adaptation strategy by public agents attempting to lower third-party opportunistic challenges.

Keywords: Transaction Costs, Public Contracting and Procurement, Political Economy, Regulated Industries

JEL Classification: D23, D73, D78, H57, K23

Suggested Citation

Moszoro, Marian W. and Spiller, Pablo T. and Stolorz, Sebastian, Rigidity of Public Contracts (July 14, 2014). GMU School of Public Policy Research Paper No. 2013-13; IESE Business School Working Paper No. 07/2013. Available at SSRN: https://ssrn.com/abstract=2289719 or http://dx.doi.org/10.2139/ssrn.2289719

Marian W. Moszoro (Contact Author)

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

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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)

Sebastian Stolorz

George Mason University - School of Policy, Government, and International Affairs ( email )

Founders Hall
3351 Fairfax Dr.
Arlington, VA 22201
United States

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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