Government Intervention and the Macroeconomy: Micro-evidence on the Transmission of Government Procurement

Depending on the country and year, governments spend between 10% and 20% of GDP on public procurement.I collect data on millions of public procurement contracts awarded in many countries.

I have detailed information about the contracts (value, awarding institution, etc.), and merge this information with firm-level balance sheet and firm-to-firm transaction data. This allows me to study the transmission mechanisms from government procurement to the aggregate economy.

The aim is to investigate the particular economic channels through which outcomes in public procurement permeate to the rest of the economy, and to identify the sources of inefficiencies in the process.My proposal is divided into three blocks that aim to answer crucial questions about the role that public procurement plays in determining macroeconomic outcomes.1.

How costly is governments’ home-bias (i.e., governments buy disproportionally and unpredictably more from local firms) for aggregate productivity and welfare in Europe?2. What are the effects of corruption in procurement on firms’ dynamics?3.

What are the factors determining the aggregate price at which governments buy goods and services?What are the implications for consumers’ welfare?The novelty of the data and the complex interactions between public procurement outcomes, economic distortions and firms’ decisions make this research proposal ambitious and place it at the research frontier.