Third parties’ opportunism and renegotiations in public contracts: evidence from manipulation in Italian procurement

Alessandro Cavalieri (University of Turin)

Abstract

This paper investigates the effect of political pressure on renegotiation rates in public procurement, as mediated by discretion in the choice of the contractor. The analysis exploits an Italian 2016 reform changing the thresholds regulating discretion in the choice of the procurer. In particular, the presence of contracts bunching in the proximity of a threshold allows us to analyse the effect of political competition on (i) the incentives to illegally manipulate contracts' project value to gain discretion, and (ii) its effect on contract renegotiation. Political pressure is found to be negatively related to manipulation, while manipulation-induced discretion appears to lower the probability of renegotiation.

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