NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Rigidity of Public Contracts

Marian Moszoro, Pablo T. Spiller, Sebastian Stolorz

NBER Working Paper No. 21186
Issued in May 2015
NBER Program(s):Law and Economics

We apply algorithmic data reading and textual analysis to compare the features of contracts in regulated industries subject to public scrutiny (which we call "public contracts") with relational private contracts. We show that public contracts are lengthier and have more rule-based rigid clauses; in addition, their renegotiation is formalized in amendments. We also find that contract length and the frequency of rigidity clauses increases in political contestability and closer to upcoming elections. We maintain that the higher rigidity of public contracts is a political risk adaptation strategy carried out by public agents attempting to lower third-party opportunistic challenges.

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Document Object Identifier (DOI): 10.3386/w21186

Published: Marian Moszoro & Pablo T. Spiller & Sebastian Stolorz, 2016. "Rigidity of Public Contracts," Journal of Empirical Legal Studies, vol 13(3), pages 396-427.

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