Discussion paper

DP11426 Court Efficiency and Procurement Performance

Disputes over penalties for breaching a contract are often resolved in court. A simple model illustrates how inefficient courts can sway public buyers from enforcing a penalty for late delivery in order to avoid litigation, therefore inducing sellers to delay contract delivery. By using a large dataset on Italian public procurement, we empirically study the effects of court inefficiency on public work performance. We find that where courts are inefficient: i) public works are delivered with longer delays; ii) delays increase for more valuable contracts; iii) contracts are more often awarded to larger suppliers; and iv) a higher share of the payment is postponed after delivery. Other interpretations receive less support from the data.


Spagnolo, G, D Coviello, L Moretti and P Valbonesi (2016), ‘DP11426 Court Efficiency and Procurement Performance‘, CEPR Discussion Paper No. 11426. CEPR Press, Paris & London. https://cepr.org/publications/dp11426