Paying over the odds at the end of the fiscal year. Evidence from Ukraine

Margaryta Klymak and Stuart Baumann

Journal of Econometrics, 2025, vol. 249, issue PC

Abstract: Governments are the largest buyers in most countries. They tend to operate annually expiring budgets and spend disproportionately large amounts at year-end. This paper is the first to investigate whether supplier firms increase prices at year-end to benefit from this behaviour. We develop a novel method using neural networks to estimate firms margins from the bidding behaviour of other firms in procurement auctions. We use a dataset of Ukrainian government procurement between 2017 and 2021 to document significantly higher prices and supplier profit margins at year-end. We demonstrate how results change depending on the type of good, the length of the buyer–supplier relationship, and the impact of Covid-19. Finally, we provide policy suggestions on how funds could be saved.

Keywords: Government spending; Procurement; Fiscal year distortions; Year-end spending spikes; Neural networks; Ukraine (search for similar items in EconPapers)
JEL-codes: H57 H61 L22 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:249:y:2025:i:pc:s0304407624002549

DOI: 10.1016/j.jeconom.2024.105903

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