Political Contestability and Contract Rigidity: An Analysis of Procurement Contracts
34 Pages Posted: 3 Aug 2014 Last revised: 29 Feb 2016
Date Written: February 24, 2016
We compare procurement contracts where the procurer is either a public agent or a private corporation. Using algorithmic data reading and textual analysis on a rich dataset of con- tracts for a standardized product and service from a single provider, we find that public contracts feature more rigidity clauses than private-to-private contracts and their renegotiation is formalized more frequently in amendments. We further compare in-sample public contracts and find similar patterns rising in political contestability using several measures. We argue that a significant part of the contractual rigidity difference between purely private and public contracts due to the specific nature of public contracts which are more permeable to the political environment.
Keywords: Contractual Rigidity, Private and Public Procurement, Political Contestability, Renegotiation
JEL Classification: D23, D72, D73, D78, H57
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