Local governments may increase expenditure arrears to relax the financial constraints induced by intergovernmental transfer cuts. We assess this hypothesis using information from accounting and financial reports from Italian municipalities for the period 2003-2010. By exploiting the long-lasting...

Disputes over penalties for breach of contract are often solved in court. A simple model shows how inefficient courts may induce public buyers to refrain from enforcing penalties for late delivery to avoid litigation, inducing sellers to delay. Using a large dataset on Italian public...