TY  - JOUR
AU  - Engel,Eduardo
AU  - Fischer,Ronald
AU  - Galetovic,Alexander
TI  - Renegotiation Without Holdup: Anticipating Spending and Infrastructure Concessions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12399
PY  - 2006
Y2  - July 2006
UR  - http://www.nber.org/papers/w12399
L1  - http://www.nber.org/papers/w12399.pdf
N1  - Author contact info:
Eduardo Engel
Yale University
Department of Economics
P.O. Box 208268
New Haven, CT  06520-8268
Tel: 203/432-5595
Fax: 203/432-5779
E-Mail: eduardo.engel@yale.edu

Ronald Fischer
Centro de Economia Aplicada (CEA)
Departamento de Ingenieria Industrial
Universidad de Chile
Republica 701 Santiago CHILE
E-Mail: rfischer@dii.uchile.cl

Alexander Galetovic
Fac. Cs. Economicas y Empresariales
Universidad de Los Andes
Av. San Carlos de Apoquindo 2200
Santiago CHILE
E-Mail: alexander@galetovic.cl
M2  - featured in NBER digest on 2006-07-31
AB  - Infrastructure concessions are frequently renegotiated after investments are sunk, resulting in better contractual terms for the franchise holders. This paper offers a political economy explanation for renegotiations that occur with no apparent holdup. We argue that they are used by political incumbents to anticipate infrastructure spending and thereby increase the probability of winning an upcoming election.
	Contract renegotiations allow administrations to replicate the effects of issuing debt. Yet debt issues are incorporated in the budget, must be approved by Congress and are therefore subject to the opposition%u2019s review. By contrast, under current accounting standards the obligations created by renegotiations circumvent the budgetary process in most countries. Hence, renegotiations allow incumbents to spend more without being subject to Congressional oversight.
ER  -