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Court Efficiency and Procurement Performance
Author(s) -
Coviello Decio,
Moretti Luigi,
Spagnolo Giancarlo,
Valbonesi Paola
Publication year - 2018
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12225
Subject(s) - inefficiency , procurement , payment , order (exchange) , business , work (physics) , simple (philosophy) , law and economics , economics , microeconomics , finance , marketing , engineering , mechanical engineering , philosophy , epistemology
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.