Border effects in European public procurement

Information costs and home bias: an analysis of US holdings of foreign equities

Benedikt Herz and Xose-Luis Varela-Irimia

Journal of Economic Geography, 2020, vol. 20, issue 6, 1359-1405

Abstract: In this paper, we document border effects in the award of public contracts in the European single market. We use a dataset of 1.8 million contract awards, which we match to geolocations to estimate a gravity model of procurement flows between European NUTS3 region pairs. We find very sizable cross-national border effects for all types of goods and services, even after controlling for physical distance, currency, cultural differences and other variables. For example, ‘local’ bidders for IT services contracts are almost 250 times more likely to be awarded a contract than ‘foreign’ bidders. More surprisingly, we find substantial cross-regional border effects within countries. While we document that firms’ bidding decisions are subject to border effects, we cannot exclude a home bias of contracting authorities in the award of public contracts.

Keywords: Public procurement; public contract; border effect; gravity model; European Union (search for similar items in EconPapers)
JEL-codes: F14 H57 R12 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Working Paper: Border Effects in European Public Procurement (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jecgeo:v:20:y:2020:i:6:p:1359-1405.

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