The Permeability of Public Contracts: Evidence from Renegotiations in the French Car Park Sector

Zoé Le Squeren and John Moore – The Permeability of Public Contracts: Evidence from Renegotiations in the French Car Park Sector
Abstract: Recent research suggests that public and private agreements are inherently different. Public contracts should indeed be more permeable to the external (and, more specifically, the political) environment. This paper studies empirically the intrinsic differences between these two types of contracting.
We focus in particular on the different impact local elections have on the execution of public and of private agreements. In order to do so, we investigate the occurrence of renegotiations of each type of contract prior to local elections. We believe that, as public contracts belong to the public sphere, their renegotiations should be affected by the electoral calendar, while renegotiations of private contracts should not. To test this, we use an original dataset comprising every renegotiation of the exhaustive set of public-private and private-private contracts signed by the French car park leader between 1968 and 2008. We use a difference-in-difference methodology to show that, compared with private contract renegotiations, public contract renegotiations significantly increase before local elections. In particular, renegotiations aiming at modifying the end-user fees or the financial side of the contract (i.e. the remuneration of one of the parties) increase before an election, whereas all other types of renegotiation do not.