Court Efficiency and Procurement Performance1. (17th April 2018)

• Record Type: Journal Article
• Authors: Coviello, Decio; Moretti, Luigi; Spagnolo, Giancarlo; Valbonesi, Paola
• Is Part Of: Scandinavian journal of economics. Volume 120:Number 3(2018)
• Page Start: 826
• Page End: 858
• Publication Date: 2018-04-17
• Subjects: Court efficiency -- delay -- enforcement cost -- litigation -- performance in contract execution -- public procurement -- time incentives; Economics -- Periodicals; 330.05
• DOI: 10.1111/sjoe.12225
• Languages: English
• ISSNs: 0347-0520

Abstract

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, thereby 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. Where courts are inefficient, we find the following: public works are delivered with longer delays; delays increase for more valuable contracts; contracts are more often awarded to larger suppliers; and a higher share of the payment is postponed after delivery. Other interpretations receive less support from the data.