Economic Efficiency and Political Capture in Public Service Contracts

Philippe Gagnepain and Marc Ivaldi

Post-Print from HAL

Abstract: We consider contracts for public transport services between a public authority and a transport operator. We build a structural endogenous switching model where the contract choice results from the combined effects of the incentivization scheme aimed at monitoring the operator's efficiency and the political agenda followed by the regulator to account for the voice of private interests. Our results support theoretical predictions as they suggest that cost-plus contracts entail a higher cost for society than fixed-price contracts but allow the public authority to leave a rent to a subset of individuals. Accounting for transfers to interest groups in welfare computations reduces the welfare gap between cost-plus and fixed-price regimes.

Keywords: Public; Service; Contracts (search for similar items in EconPapers)
Date: 2017-03
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Published in Journal of Industrial Economics, 2017, 65 (1), pp.1-38. ⟨10.1111/joie.12118⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Economic Efficiency and Political Capture in Public Service Contracts (2017)
Working Paper: Economic Efficiency and Political Capture in Public Service Contracts (2017)
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:hal:journl:halshs-01524894

DOI: 10.1111/joie.12118

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().