Procuring survival


Cappelletti, Matilde ; Giuffrida, Leonardo M.


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URL: https://madoc.bib.uni-mannheim.de/61209
URN: urn:nbn:de:bsz:180-madoc-612091
Document Type: Working paper
Year of publication: 2021
The title of a journal, publication series: ZEW Discussion Papers
Volume: 21-093
Place of publication: Mannheim
Publication language: English
Institution: Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences - CDSE (Economics)
Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D44 , H32 , H57,
Keywords (English): firm survival , firm dynamics , government demand , public procurement , demand shocks , productivity , auctions , regression discontinuity design
Abstract: Public spending (i.e., “G”) enables governments to fulfill their fiscal policies. This paper takes a micro perspective and quantifies the impact of procurement spending — a specific component of G — on firm survival. We find that firms that receive public contracts survive longer, ceteris paribus, and that this effect accrues over time, reaching 20 percentage points after ten years. Our results are based on a novel dataset for Italy that combines balance sheet data on the universe of limited liability firms with administrative records on market entry and exit and quasi-universe of public contract data between 2008 and 2018. For construction auctions, we also rely on bid-level data to inform a regression discontinuity analysis. We find that the survival rate of winners relative to marginal losers is 70% higher after 36 months — or after two years and half of the median contract expiration. We explore several alternative channels that could rationalize our findings. We find that recipients do not become more productive, and their earnings become increasingly dependent on sales to public customers.

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