"Public procurement and the risk of severe weather events", joint with A. Bafundi, R. Camboni, and P. Valbonesi
Abstract
We study the role of relational contracts in public procurements when public buyers (PBs) are exposed to severe weather events (SWEs). We develop a theoretical model where PBs select the firms that participate in procurement procedures and use this discretion to reduce the losses SWEs cause. Drawing on Italian public procurement data, we find support for the existence of relational contracts linked to SWEs. PBs that were exposed to SWEs use invitation-only procedures more often; and invitation-only procedures won by firms that have previously worked for the same PB experience less often time overruns in work execution.
"Building Trust in Government: The Opportunities and Challenges of Adverse Shocks", joint with A. Acharya, H. Pei
Abstract
How do adverse shocks that align the interests of state and society shape a government's ability to build and maintain the trust of its citizens? We focus on the case where citizens cannot tell whether an adverse shock that warrants government action has hit, unless the government mishandles the crisis. We show that: (i) increasing the frequency of shocks has no impact on the scope of trust if shocks are severe, but reduces the scope of trust if shocks are mild; (ii) increasing the severity of shocks lowers social welfare but increases the extent of trust; and (iii) the opportunity to build a reputation for being trustworthy enhances both the government's payoff and social welfare beyond what is achievable when citizens know that the government is strategic.