Julian di Giovanni, Manuel García-Santana, Priit Jeenas, Enrique Moral-Benito, Josep Pijoan-Mas, 15 March 2022

Whether the allocation of public procurement contracts should target small firms is the subject of active policy debate. This column uses firm-level evidence and a macroeconomic model to show that granting public procurement contracts to small firms may help them accumulate assets and overcome their financial constraints in the long run, but the reallocation of projects may damage the saving incentives of larger firms. Specific details on how procurement policies are implemented at the firm level are crucial for understanding their macroeconomic impact.

Hans Hvide, Tom G. Meling, 16 December 2019

Successfully predicting which startups will thrive has long bedevilled economists. Using data from procurement auctions in Norway, this column finds that temporary demand shocks have long-term effects: startups that win a procurement auction are 20% larger than the runners-up, even years after the contract work has ended. In terms of job creation and sales growth, winning a procurement auction seems to have much larger effects for startups than for mature firms, which suggests the potential value in public policies that promote startups’ participation in government procurement auctions.

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