This paper explores the impact of home-biased public procurement on the location of industries. It is shown theoretically and empirically that discriminatory procurement can offset other locational determinants. In the theoretical part, we demonstrate that a bias in public procurement towards domestically produced goods can counter agglomeration forces substantially. The empirical analysis draws on a cross-country, cross-industry data sample for the EU. In the full sample, the market-based determinants of industry location identified in the theory are significant in explaining EU industrial specialisation. However, these determinants lose statistical significance in the sub-sample of procurement-sensitive industries. In this sub-sample, proxies for the degree of liberalisation of public procurement relate positively to specialisation.
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Paper provided by Trinity College Dublin, Department of Economics in its series Economics Technical Papers with number
983.
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Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F15 - International Economics - - Trade - - - Economic Integration H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
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