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Indirect Savings from Public Procurement Centralization

Author

Listed:
  • Clarissa Lotti
  • Arieda Muço
  • Giancarlo Spagnolo
  • Tommaso Valletti

Abstract

Centralization of public procurement can lower prices for the government's direct purchase of goods and services. This paper focuses on indirect savings. Public administrations that do not procure directly through a central procurement agency might benefit from the availability of centrally procured goods. We exploit the introduction of a central purchasing agency in Italy and find that prices came down by 22 percent among administrations that bought autonomously. These indirect effects appear to be driven by informational externalities, especially for less competent public buyers purchasing technologically more complex goods. Accounting for indirect savings increases the estimate of direct ones.

Suggested Citation

  • Clarissa Lotti & Arieda Muço & Giancarlo Spagnolo & Tommaso Valletti, 2024. "Indirect Savings from Public Procurement Centralization," American Economic Journal: Economic Policy, American Economic Association, vol. 16(3), pages 347-366, August.
    • Handle: RePEc:aea:aejpol:v:16:y:2024:i:3:p:347-66
    DOI: 10.1257/pol.20220357
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    References listed on IDEAS

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    1. Chiappinelli, Olga & Giuffrida, Leonardo M. & Spagnolo, Giancarlo, 2025. "Public procurement as an innovation policy: Where do we stand?," International Journal of Industrial Organization, Elsevier, vol. 100(C).

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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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