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Court Efficiency and Procurement Performance

Listed author(s):
  • Decio Coviello

    (University of Montreal)

  • Luigi Moretti

    ()

    (University of Padova)

  • Giancarlo Spagnolo

    (University of Roma "Tor Vergata")

  • Paola Valbonesi

    ()

    (University of Padova)

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.

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File URL: http://economia.unipd.it/sites/decon.unipd.it/files/20130164.pdf
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Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0164.

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Length: 43 pages
Date of creation: Jun 2013
Handle: RePEc:pad:wpaper:0164
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  1. Luigi Moretti & Paola Valbonesi, 2015. "Firms’ Qualifications and Subcontracting in Public Procurement: An Empirical Investigation," Journal of Law, Economics and Organization, Oxford University Press, vol. 31(3), pages 568-598.
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  4. Decio Coviello & Andrea Guglielmo & Giancarlo Spagnolo, 2015. "The Effect of Discretion on Procurement Performance," EIEF Working Papers Series 1510, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2015.
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  16. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
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  21. Coviello, Decio & Gagliarducci, Stefano, 2010. "Building Political Collusion: Evidence from Procurement Auctions," IZA Discussion Papers 4939, Institute for the Study of Labor (IZA).
  22. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-1097, September.
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  24. Matthieu Chemin, 2012. "Does Court Speed Shape Economic Activity? Evidence from a Court Reform in India," Journal of Law, Economics and Organization, Oxford University Press, vol. 28(3), pages 460-485, August.
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  26. Decio Coviello & Andrea Ichino & Nicola Persico, 2015. "The Inefficiency Of Worker Time Use," Journal of the European Economic Association, European Economic Association, vol. 13(5), pages 906-947, October.
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