Do local court inefficiencies delay public works?
Evidence from Italian municipalities
Public procurement accounts for around 12% of global GDP and 63% of expenditures are
managed by subnational governments across OECD countries. In Italy, municipalities
can impose penalties on contractors for breaches of contract, for example delays in
delivery, often leading to contractors suing the municipality in local courts, which
can in turn further delay delivery. As such the efficiency of the local judiciary
can have a strong bearing on the final delivery of public works. This study assesses
the causal effect of those efficiencies on the ultimate delay in the execution of
local public contracts. The results show that inefficient courts lead to further delays
in the execution of public works that are already long overdue. However, inefficient
courts also appear to deter companies to pursue litigation in cases where delays were
much lower. Overall, the impact on long-overdue contracts prevails and the aggregate
effect is negative: the total delay in the execution of local public contracts in
the 25% least efficient courts is more than twice as large as in the 25% most efficient
courts.
Available from April 05, 2023
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