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Firms' Efficiency, Exits and Government procurement contracts

Evguenia Bessonova ()
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Evguenia Bessonova: Bank of Russia, Russian Federation

No wps49, Bank of Russia Working Paper Series from Bank of Russia

Abstract: This study provides evidence that productivity growth trends in Russia are similar to those in other countries where technology leaders enjoy productivity growth with a gap increasing between them and other companies. The survival analysis suggests that the most efficient firms quit the market at a faster rate than firms in other efficiency groups in the Russian economy. Survival functions of the least efficient firm do not always differ significantly from those of other companies. Results based on public procurement data provide evidence that additional financing from government contracts helps both the most and the least efficient firms to survive and shelters them from competitive pressure. In the short run, the positive effect of winning government procurement contracts for leaders seems to be only observed in their home regions, providing indirect evidence that the public procurement system does not support all types of firms with growth potential but only those affiliated with local authorities. Intervention in the mechanism of market selection through the system of public procurement could have a strong negative effect on economic growth as it provides incentives for inefficient firms without growth potential to stay in the market longer.

Keywords: TFP growth; efficiency; productivity gap; government procurement contracts; firms’ exits. (search for similar items in EconPapers)
JEL-codes: D24 H57 L52 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2019-10
New Economics Papers: this item is included in nep-bec, nep-cis, nep-eff, nep-reg and nep-tra
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