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Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States

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  • Viktor Slavtchev
  • Simon Wiederhold

Abstract

Governments purchase everything from airplanes to zucchini. This paper investigates the role of the technological content of government procurement in innovation. In a theoretical model, we first show that a shift in the composition of public purchases toward high-tech products translates into higher economy-wide returns to innovation, leading to an increase in the aggregate level of private R&D. Using unique data on federal procurement in US states and performing panel fixed-effects estimations, we find support for the model's prediction of a positive R&D effect of the technological content of government procurement. Instrumental-variable estimations suggest a causal interpretation of our findings. (JEL H57, H76, O31, O32, O38)

Suggested Citation

  • Viktor Slavtchev & Simon Wiederhold, 2016. "Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(2), pages 45-84, April.
    • Handle: RePEc:aea:aejmac:v:8:y:2016:i:2:p:45-84
    Note: DOI: 10.1257/mac.20130069
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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