Buy Big or Buy Small? Procurement Policies, Firms' Financing, and the Macroeconomy

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

No 1321, Working Papers from Barcelona School of Economics

Abstract: We provide a framework to study how public procurement affects the macroeconomy. Merging firm and procurement contract level data, we find evidence consistent with procurement acting as collateral for firms and facilitating long-run firm growth. We build a firm-dynamics model with asset- and earnings-based borrowing constraints and a government purchasing goods and services to analyze selection into procurement and firm dynamics after winning procurement contracts. We use the model to study the macroeconomic effects of expenditure-neutral policy reforms promoting small firms' participation in procurement and show how the impact on economic activity depends on the specific features of the reforms.

Keywords: financial frictions; aggregate productivity; Government procurement; capital accumulation (search for similar items in EconPapers)
JEL-codes: E22 E23 E62 G32 (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-dge, nep-ent and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Buy Big or Buy Small ? Procurement Policies, Firms’ Financing, and the Macroeconomy (2023)
Working Paper: Buy Big or Buy Small? Procurement Policies, Firms' Financing, and the Macroeconomy (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:1321

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