EconPapers    
Economics at your fingertips  
 

New development: The application of incomplete contract theory to documenting Social Impact Bonds

Deborah Burand

Public Money & Management, 2020, vol. 40, issue 3, 247-249

Abstract: Nobel laureate Oliver Hart’s work in developing a theory of incomplete contracting is relevant to explaining the evolution of the pay for success contracts that undergird Social Impact Bonds (SIBs). By its very nature, a pay for success contract that supports a SIB is likely to be functionally incomplete in that it is unable to describe and differentiate in the initial contract all relevant future states of the world in which the contract is to operate. Navigating this incomplete world can be particularly challenging when it comes to government contracting for quality outcomes in social services. Accordingly, Hart’s incomplete contracting framework can help us to think more clearly about how to document a pay for success contract that best supports a SIB transaction.Deterministic pay for success contracts serve neither the impact goals nor the contracting parties of SIBs well. This article explains how flexibility has been built into many of the contracts that support SIBs in the USA and beyond through the use of contractual governance mechanisms. There is room, however, for improvement in these governance mechanisms –particularly their scope, composition and processes.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/09540962.2020.1714317 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:pubmmg:v:40:y:2020:i:3:p:247-249

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RPMM20

DOI: 10.1080/09540962.2020.1714317

Access Statistics for this article

Public Money & Management is currently edited by Michaela Lavender

More articles in Public Money & Management from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2025-03-20
Handle: RePEc:taf:pubmmg:v:40:y:2020:i:3:p:247-249