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Government procurement and resource misallocation: Evidence from China

Jing Hang and Chaoqun Zhan

Journal of Economic Behavior & Organization, 2023, vol. 216, issue C, 568-589

Abstract: Government often acts as the largest buyer in an economy through government procurement. The allocation of procurement orders however is often distorted. We build a model with heterogeneous firms endogenously seeking government favors in procurement to show that misallocation of procurement orders further leads to misallocation of production factors. Using the enactment of the in 2003 as a natural experiment, we find that tighter regulation of procurement in China lowers the extent of resource misallocation in industries that rely more on government procurement. We further provide firm-level evidence in support of our model.

Keywords: Government procurement; Resource misallocation; Corruption (search for similar items in EconPapers)
JEL-codes: H57 O43 O47 O53 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:216:y:2023:i:c:p:568-589

DOI: 10.1016/j.jebo.2023.10.014

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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