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Court Efficiency and Procurement Performance

Author

Listed:
  • Decio Coviello

    (University of Montreal)

  • Luigi Moretti

    () (University of Padova)

  • Giancarlo Spagnolo

    (University of Roma "Tor Vergata")

  • Paola Valbonesi

    () (University of Padova)

Abstract

Disputes on the penalties enforceable for breach of contract are often solved in court. Using a large dataset on Italian public procurement contracts, we study the effects of the inefficiency of the local law courts on the delay with which contractors deliver public works. First we sketch a simple model to see how inefficient law courts - i.e. those characterized by longer average duration of trials - may induce public buyers to refrain from enforcing penalties for late delivery in order to avoid costly disputes in court. Then our empirical findings show that, where the local law courts are inefficient: i) public works are delivered with longer delays, and this applies particularly to higher-value contracts - i.e. complex projects; ii) contracts are more often awarded to larger firms; and iii) on average, a higher share of final payment in contracts is adopted. These results are not driven by omitted environmental variables, since we show that delays in the completion of contracted works are still a selected by the efficiency of the local law courts after including province-related fixed effects in the model and considering other possible explanations for our findings.

Suggested Citation

  • Decio Coviello & Luigi Moretti & Giancarlo Spagnolo & Paola Valbonesi, 2013. "Court Efficiency and Procurement Performance," "Marco Fanno" Working Papers 0164, Dipartimento di Scienze Economiche "Marco Fanno".
  • Handle: RePEc:pad:wpaper:0164
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    References listed on IDEAS

    as
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    Cited by:

    1. 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.
    2. Decarolis, Francesco & Palumbo, Giuliana, 2015. "Renegotiation of public contracts: An empirical analysis," Economics Letters, Elsevier, vol. 132(C), pages 77-81.
    3. Dosi, Cesare & Moretto, Michele, 2017. "Cost Uncertainty and Time Overruns in Public Procurement: a Scoring Auction for a Contract with Delay Penalties," ET: Economic Theory 253215, Fondazione Eni Enrico Mattei (FEEM).
    4. Stefano Galavotti & Luigi Moretti & Paola Valbonesi, 2014. "Sophisticated Bidders In Beauty-Contest Auctions," "Marco Fanno" Working Papers 0187, Dipartimento di Scienze Economiche "Marco Fanno".
    5. 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.
    6. 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.
    7. 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".
    8. Stefano Galavotti & Luigi Moretti & Paola Valbonesi, 2014. "Sophisticated Bidders In Beauty-Contest Auctions," "Marco Fanno" Working Papers 0187, Dipartimento di Scienze Economiche "Marco Fanno".
    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.
    10. repec:kap:regeco:v:53:y:2018:i:1:d:10.1007_s11149-017-9346-6 is not listed on IDEAS

    More about this item

    Keywords

    efficiency of the law courts; enforcement of contract obligations; public procurement contracts; time incentives.;

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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