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Public procurement and firms: Evidence from Kenya

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  • Mensah, Justice Tei
  • Wankuru, Peter Chacha
  • Kirui, Benard K.

Abstract

How important is government business to the private sector in developing economies? We use administrative tax data on firm-to-firm transactions in Kenya to examine the effects of becoming a government contractor on firm performance. Using an event study design, we document significant gains from becoming a supplier to a government entity. Four years later, beneficiary firms experience a 27% increase in productivity and employ 10% more. These effects are somewhat comparable to the gains from joining a multinational supply chain. Beneficiary firms also expand their trading networks to other private firms. Relaxing credit constraints and improving resilience to shocks are likely operative channels of impact. These findings highlight the potential welfare gains from improving efficiency in public procurement.

Suggested Citation

  • Mensah, Justice Tei & Wankuru, Peter Chacha & Kirui, Benard K., 2026. "Public procurement and firms: Evidence from Kenya," Journal of Development Economics, Elsevier, vol. 180(C).
    • Handle: RePEc:eee:deveco:v:180:y:2026:i:c:s0304387825002391
    DOI: 10.1016/j.jdeveco.2025.103688
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