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The public cost of economic policy uncertainty: Evidence from brazilian public procurements

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  • Leite, Rodrigo

Abstract

Using a comprehensive dataset of 939,684 procurement auctions from the Brazilian federal government between 2014 and 2018, I find that economic policy uncertainty (EPU) is significantly correlated with the cost-efficiency of public procurement. Specifically, a one-standard-deviation increase in EPU correlates with a 0.2 % increase in the price paid by public administration compared to the estimated price of the goods being procured. Results are replicated using data from 2024 to 2025. Although the number of bidders stay the same, in high EPU periods bidders bid more conservatively, especially in high-value auctions. All considered, a single month with elevated EPU (1 SD above the mean) is estimated to cost the federal government approximately 6.3 million Brazilian reais.

Suggested Citation

  • Leite, Rodrigo, 2025. "The public cost of economic policy uncertainty: Evidence from brazilian public procurements," Finance Research Letters, Elsevier, vol. 86(PD).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pd:s1544612325019191
    DOI: 10.1016/j.frl.2025.108665
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    References listed on IDEAS

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    1. Sylvain Chassang & Kei Kawai & Jun Nakabayashi & Juan Ortner, 2022. "Robust Screens for Noncompetitive Bidding in Procurement Auctions," Econometrica, Econometric Society, vol. 90(1), pages 315-346, January.
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    6. Bernhard Kasberger & Karl H. Schlag, 2024. "Robust Bidding in First-Price Auctions: How to Bid Without Knowing What Others Are Doing," Management Science, INFORMS, vol. 70(7), pages 4219-4235, July.
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