Rigidity of Public Contracts
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 contracts between nongovernmental entities. We show that public contracts are lengthier and have more rule‐based rigi...
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| Published in: | Journal of empirical legal studies Vol. 13; no. 3; pp. 396 - 427 |
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| Main Authors: | , , |
| Format: | Journal Article |
| Language: | English |
| Published: |
Ithaca
Blackwell Publishing Ltd
01-09-2016
Wiley Subscription Services, Inc |
| Subjects: | |
| Online Access: | Get full text |
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| Summary: | 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 contracts between nongovernmental entities. 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 to lower the likelihood of success of politically‐motivated challenges from opportunistic third parties. |
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| Bibliography: | ArticleID:JELS12119 istex:DB144CF3B6AF551251EDA3968AC5C4CB20BE9F49 ark:/67375/WNG-ZK3RPTW4-L This research received financial support from the Jeffrey A. Jacobs Distinguished Professor of Business and Technology Chair at the Haas School of Business, University of California, Berkeley. Data from SEC's EDGAR database, CORI K‐Base, Wharton Research Data Services (WRDS), and the CQ Voting and Elections Collection are gratefully acknowledged. We thank the participants in the presentations made at the NBER Summer Institute, Harvard Law School, Duke University, University of California, Berkeley (Haas & Law), California Polytechnic State University (San Luis Obispo, CA), ETH‐Zurich (Law & Economics), FGV (Rio de Janeiro), National Research University–Higher School of Economics (Moscow), Université Paris–Sorbonne (Chaire EPPP), Université Paris–Dauphine/European University Institute (ISNIE 2013), and the World Bank for their comments. We are particularly indebted to Emmanuelle Auriol, Oren Bar‐Gill, Lisa Bernstein, Ryan Bubb, Dawn Chutkow, Oliver Hart, Jack Gansler, Louis Kaplow, Ricard Gil, Paul Grout, Scott Masten, Jeremy Mayer, Edward Rhodes, Stéphane Saussier, Henry Smith, Giancarlo Spagnolo, Holger Spamann, Kathryn Spier, Joao Veiga Malta, and two anonymous referees for helpful suggestions. |
| ISSN: | 1740-1453 1740-1461 |
| DOI: | 10.1111/jels.12119 |