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Firms’ efficiency, exits and government procurement contracts

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  • Bessonova, Evguenia

Abstract

This study shows that productivity 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 other companies do. Survival functions of the least efficient firms do not always differ significantly from those of other enterprises. Additional financial support from government contracts helps firms in all efficiency groups survive but this effect is stronger for laggards. The shift of gains from the public procurement system towards low productive firms leads to the distorted allocation of resources in the economy and, in the long run, may undermine economic growth by allowing inefficient companies to stay in the market significantly longer than would be the case in a more competitive environment.

Suggested Citation

  • Bessonova, Evguenia, 2023. "Firms’ efficiency, exits and government procurement contracts," European Journal of Political Economy, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:poleco:v:76:y:2023:i:c:s017626802200060x
    DOI: 10.1016/j.ejpoleco.2022.102253
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    More about this item

    Keywords

    TFP growth; Efficiency; Productivity gap; Government procurement contracts; Firms' exits;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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