Do Incentives and Organizational Innovations Affect the Performance of Public Administrations? Lessons from the Italian NRRP

We examine how incentives and organizational innovations affect the performance of public administrations in the provision of infrastructure, a core public good. We study Italy’s National Recovery and Resilience Plan (NRRP), which combines an unprecedented investment program with a distinctive governance model for the delivery of projects, based on performance-based conditionality, simplified procedures, contracting authorities' qualification, and economic incentives to accelerate the awarding and the start of the projects. Exploiting variation within and across municipalities we find that the NRRP significantly improved procurement awarding. In particular, the performance-oriented approach played a central role in boosting administrative performance and was further enhanced by the qualification of procuring authorities. In the execution phase, the higher initial liquidity contributed to the rapid start of construction works. We do not detect appreciable effects on the subsequent progress, likely reflecting the lack of adequate performance incentives for private counterparts in the Plan's design.