Renegotiation without Holdup: Anticipating Spending and Infrastructure Concessions

Eduardo Engel, Ronald Fischer and Alexander Galetovic ()

No 221, Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile

Abstract: Infrastructure concessions are frequently renegotiated after investments are sunk, resulting in better contractual terms for the franchise holders. This paper offers a political economy explanation for renegotiations that occur with no apparent holdup. We argue that they are used by political incumbents to anticipate infrastructure spending and thereby increase the probability of winning an upcoming election. Contract renegotiations allow administrations to replicate the effects of issuing debt. Yet debt issues are incorporated in the budget, must be approved by Congress and are therefore subject to the opposition’s review. By contrast, under current accounting standards the obligations created by renegotiations circumvent the budgetary process in most countries. Hence, renegotiations allow incumbents to spend more without being subject to Congressional oversight.

Date: 2006
New Economics Papers: this item is included in nep-bec and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://www.cea-uchile.cl/wp-content/uploads/doctrab/ASOCFILE120060807154411.pdf (application/pdf)

Related works:
Working Paper: Renegotiation Without Holdup: Anticipating Spending and Infrastructure Concessions (2006)
Working Paper: Renegotiation without Holdup: Anticipating Spending and Infrastructure Concessions (2006)
Working Paper: Renegotiation Without Holdup: Anticipating Spending and Infrastructure Concessions (2006)
Working Paper: Renegotiation Without Holdup: Anticipating Spending and Infrastructure Concessions (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:edj:ceauch:221

Access Statistics for this paper

More papers in Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile Contact information at EDIRC.
Bibliographic data for series maintained by ().