Rigidity of Public Contracts

Moszoro, Marian W.; Spiller, Pablo T.; Stolorz, Sebastian

Rigidity of Public Contracts

44 Pages Posted: 26 May 2015

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

There are 4 versions of this paper

Date Written: May 2015

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

Suggested Citation: Suggested Citation

Moszoro, Marian W. and Spiller, Pablo T. and Stolorz, Sebastian, Rigidity of Public Contracts (May 2015). NBER Working Paper No. w21186. Available at SSRN: https://ssrn.com/abstract=2610463