Economic efficiency and political capture in public service contracts

Gagnepain, Philippe and Ivaldi, Marc (2017) Economic efficiency and political capture in public service contracts. Journal of Industrial Economics, 65 (1). pp. 1-38.

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We consider contrac ts f or public transport services between a p ublicauthority and a transport operator. We b ui ld a struct ural endo gen ousswitching model w her e the contract choice re su lts from the combinedef fect s of the incentiviza tion scheme aimed a t monitoring the opera tor?sef fic iency and the politi cal agenda followed by the r egulator to accountfor the v oice of pri vate inter ests. Our resu lts support theoreticalpr ediction s a s they suggest tha t cost-plus contracts entail a higher costfor society than fix ed-price contracts b ut allo w the public authority toleave a rent to a subset of ind i viduals. Accountin g f o r transfers tointer est groups in welfar e computations reduces the welfar e ga p betweencost-plus and fix ed-price regimes.

Item Type: Article
Language: English
Date: March 2017
Refereed: Yes
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 28 Sep 2016 08:30
Last Modified: 26 Mar 2018 08:38

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