Skip to main content
Discussion Paper

Contract Enforcement and Productive Efficiency: Evidence from the Bidding and Renegotiation of Power Contracts in India

Weak contract enforcement may reduce the efficiency of investment in developing countries. I study how contract enforcement affects efficiency in procurement auctions for the largest power projects in India. I gather data on bidding and ex post contract renegotiation and find that the renegotiation of contracts in response to cost shocks is widespread, despite that bidders are allowed to index their bids to future costs like the price of coal.