The Political Cycle of Public-private Contract Renegotiations: Evidence from the French Car Park Sector

Abstract: Recent research in contract theory suggests that public-private and private-private agreements are inherently different. 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-private and of private-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-private contracts belong to the public sphere, their renegotiations should be affected by the electoral calendar, while renegotiations of private-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-private contract renegotiations, public-private renegotiations significantly increase before local elections. In particular, renegotiations aiming at modifying the tariffs 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. Possible explanations for these results are considered.