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.