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Paying over the odds at the end of the fiscal year. Evidence from Ukraine

Author

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  • Klymak, Margaryta
  • Baumann, Stuart

Abstract

Governments are the largest buyers in most countries. They tend to operate annually expiring budgets and spend disproportionately large amounts at year-end. This paper is the first to investigate whether supplier firms increase prices at year-end to benefit from this behaviour. We develop a novel method using neural networks to estimate firms margins from the bidding behaviour of other firms in procurement auctions. We use a dataset of Ukrainian government procurement between 2017 and 2021 to document significantly higher prices and supplier profit margins at year-end. We demonstrate how results change depending on the type of good, the length of the buyer–supplier relationship, and the impact of Covid-19. Finally, we provide policy suggestions on how funds could be saved.

Suggested Citation

  • Klymak, Margaryta & Baumann, Stuart, 2025. "Paying over the odds at the end of the fiscal year. Evidence from Ukraine," Journal of Econometrics, Elsevier, vol. 249(PC).
    • Handle: RePEc:eee:econom:v:249:y:2025:i:pc:s0304407624002549
    DOI: 10.1016/j.jeconom.2024.105903
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    More about this item

    Keywords

    Government spending; Procurement; Fiscal year distortions; Year-end spending spikes; Neural networks; Ukraine;
    All these keywords.

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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