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Industrial Specialisation and Public Procurement: Theory and Empirical Evidence

Author

Listed:
  • Brülhart, Marius

    (Ecole des HEC University of Lausanne)

  • Trionfetti, Federico

    (Queen’s University of Belfast Division of Economics)

Abstract

Public-sector purchases from private firms account for over 10 percent of GDP in most developed countries, and they are typically biased in favour of domestic suppliers. This paper explores the impact of discriminatory public procurement on the location of industries. Our main theoretical finding is that, in a setting with increasing returns and trade costs, home-biased procurement can override other determinants of industrial specialisation. Our empirical analysis underscores the significance of discriminatory procurement. Drawing on a cross-country, crossindustry data sample for the EU, we find that determinants of industry location such as factor endowments, market access and intermediate inputs are significant in sectors where public procurement is small, but they lose their significance in sectors where public procurement is important.

Suggested Citation

  • Brülhart, Marius & Trionfetti, Federico, 2001. "Industrial Specialisation and Public Procurement: Theory and Empirical Evidence," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 16, pages 106-127.
    • Handle: RePEc:ris:integr:0156
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    Cited by:

    1. Hinterlang, Natascha & Moyen, Stephane & Röhe, Oke & Stähler, Nikolai, 2023. "Gauging the effects of the German COVID-19 fiscal stimulus package," European Economic Review, Elsevier, vol. 154(C).
    2. Marius BRÜLHART & Federico TRIONFETTI, 1999. "Home-Biased Demand and International Specialisation : A Test of Trade Theories," Cahiers de Recherches Economiques du Département d'économie 9918, Université de Lausanne, Faculté des HEC, Département d’économie.
    3. Schön, Matthias & Stähler, Nikolai, 2020. "When old meets young? Germany's population ageing and the current account," Economic Modelling, Elsevier, vol. 89(C), pages 315-336.
    4. Trionfetti, Federico, 1999. "On the home market effect: theory and empirical evidence," LSE Research Online Documents on Economics 20215, London School of Economics and Political Science, LSE Library.
    5. Kutlina-Dimitrova, Zornitsa, 2018. "Government procurement: data, trends and protectionist tendencies," DG TRADE Chief Economist Notes 2018-3, Directorate General for Trade, European Commission.
    6. Gianmarco I.P. Ottaviano, 2004. "Footloose capital, market access and the geography of regional state aid," Chapters, in: Jean-Louis Mucchielli & Thierry Mayer (ed.), Multinational Firms’ Location and the New Economic Geography, chapter 8, Edward Elgar Publishing.
    7. Rolf Weder, 2003. "Comparative home-market advantage: An empirical analysis of British and American exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(2), pages 220-247, June.
    8. Ruppert, Kilian & Stähler, Nikolai, 2020. "Household savings, capital investments and public policies: What drives the German current account?," Discussion Papers 41/2020, Deutsche Bundesbank.
    9. Benedikt Herz & Xosé-Luís Varela-Irimia, 2020. "Border effects in European public procurement [Information costs and home bias: an analysis of US holdings of foreign equities]," Journal of Economic Geography, Oxford University Press, vol. 20(6), pages 1359-1405.
    10. Pierre M. Picard & Dao‐Zhi Zeng, 2010. "A Harmonization Of First And Second Natures," Journal of Regional Science, Wiley Blackwell, vol. 50(5), pages 973-994, December.
    11. Du, Julan & He, Qing & Zhang, Ce, 2022. "Risk sharing and industrial specialization in China," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 599-626.
    12. Kempkes, Gerhard & Stähler, Nikolai, 2021. "Re-allocating taxing rights and minimum tax rates in international profit taxation," Discussion Papers 03/2021, Deutsche Bundesbank.
    13. Kutlina-Dimitrova, Zornitsa, 2017. "Can we put a price on extending the scope of the GPA? First quantitative assessment," DG TRADE Chief Economist Notes 2017-1, Directorate General for Trade, European Commission.
    14. Chiara Carboni & Elisabetta Iossa & Gianpiero Mattera, 2018. "Barriers towards foreign firms in international public procurement markets: a review," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(1), pages 85-107, March.
    15. Robert L. Bray & Juan Camilo Serpa & Ahmet Colak, 2019. "Supply Chain Proximity and Product Quality," Management Science, INFORMS, vol. 65(9), pages 4079-4099, September.
    16. Chiara Carboni & Elisabetta Iossa & Gianpiero Mattera, 2017. "Barriers to Public Procurement: A Review and Recent Patterns in the EU," IEFE Working Papers 92, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    17. Jens Südekum, 2010. "National champions and globalization," Canadian Journal of Economics, Canadian Economics Association, vol. 43(1), pages 204-231, February.
    18. Shingal, Anirudh, 2013. ""New" econometric evidence for the Baldwin-Richardson (1972)/Miyagiwa (1991) theoretical predictions in government procurement," MPRA Paper 49138, University Library of Munich, Germany.
    19. Aguiar, Angel, 2015. "Public procurement data base extension and modelling modifications for analysis purposes," Conference papers 332582, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    20. Eric Strobl, 2004. "Trends and Determinants of the Geographic Dispersion of Irish Manufacturing Activity, 1926- 1996," Regional Studies, Taylor & Francis Journals, vol. 38(2), pages 191-205.
    21. MILE 02, Anirudh Shingal, 2012. "Exploring foreign market access in government procurement," Papers 305, World Trade Institute.

    More about this item

    Keywords

    Public Procurement; Industrial Specialisation; European Union;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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