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Court Efficiency and Procurement Performance

Author

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  • Coviello, Decio
  • Moretti, Luigi
  • Spagnolo, Giancarlo
  • Valbonesi, Paola

Abstract

Disputes over penalties for breaching a contract are often resolved in court. A simple model illustrates how inefficient courts can sway public buyers from enforcing a penalty for late delivery in order to avoid litigation, therefore inducing sellers to delay contract delivery. By using a large dataset on Italian public procurement, we empirically study the effects of court inefficiency on public work performance. We find that where courts are inefficient: i) public works are delivered with longer delays; ii) delays increase for more valuable contracts; iii) contracts are more often awarded to larger suppliers; and iv) a higher share of the payment is postponed after delivery. Other interpretations receive less support from the data.

Suggested Citation

  • Coviello, Decio & Moretti, Luigi & Spagnolo, Giancarlo & Valbonesi, Paola, 2016. "Court Efficiency and Procurement Performance," CEPR Discussion Papers 11426, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11426
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Decarolis, Francesco & Palumbo, Giuliana, 2015. "Renegotiation of public contracts: An empirical analysis," Economics Letters, Elsevier, vol. 132(C), pages 77-81.
    2. Stefano Galavotti & Luigi Moretti & Paola Valbonesi, 2014. "Sophisticated Bidders In Beauty-Contest Auctions," "Marco Fanno" Working Papers 0187, Dipartimento di Scienze Economiche "Marco Fanno".
    3. Moretti, Luigi, 2014. "Local financial development, socio-institutional environment, and firm productivity: Evidence from Italy," European Journal of Political Economy, Elsevier, vol. 35(C), pages 38-51.
    4. Cesare Dosi & Michele Moretto, 2017. "Cost Uncertainty and Time Overruns in Public Procurement: a Scoring Auction for a Contract with Delay Penalties," Working Papers 2017.02, Fondazione Eni Enrico Mattei.
    5. Olga Chiappinelli, 2017. "Decentralization and Public Procurement Performance: New Evidence from Italy," Discussion Papers of DIW Berlin 1704, DIW Berlin, German Institute for Economic Research.
    6. Laura Rondi & Paola Valbonesi, 2017. "Pre- and post-award outsourcing: Temporary partnership versus subcontracting in public procurement," "Marco Fanno" Working Papers 0211, Dipartimento di Scienze Economiche "Marco Fanno".
    7. repec:kap:regeco:v:53:y:2018:i:1:d:10.1007_s11149-017-9346-6 is not listed on IDEAS
    8. Chiara D’Alpaos & Michele Moretto & Paola Valbonesi & Sergio Vergalli, 2013. "Time overruns as opportunistic behavior in public procurement," Journal of Economics, Springer, vol. 110(1), pages 25-43, September.
    9. Giuseppe Gori & Patrizia Lattarulo & Marco Mariani, 2014. "The effect of Regional Law 35/2011 on strategic public works," Studi e approfondimenti 521, Istituto Regionale per la Programmazione Economica della Toscana.

    More about this item

    Keywords

    Court efficiency; public procurement; time incentives; performance in contract execution; delay; litigation; enforcement cost.;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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