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A contest model of liberalizing government procurements

  • Long, Ngo Van
  • Stähler, Frank

This paper models liberalization of government procurements as admitting entry of foreign firms in a contest among potential rent seekers. It contributes to the literature on how institutions influence socially desirable outcomes. Liberalizing procurements reduces wasteful domestic lobbying but also increases the likelihood that a foreign firm will capture the rent. A main result is that the domestic welfare change is not monotonic in the foreign firms' abilities. Furthermore, we show that domestic liberalization policies can be inefficient from the global point of view because foreign lobbying costs can outweight productive efficiency.

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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 25 (2009)
Issue (Month): 4 (December)
Pages: 479-488

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Handle: RePEc:eee:poleco:v:25:y:2009:i:4:p:479-488
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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  1. Evenett, Simon J. & Hoekman, Bernard M., 2004. "Government procurement : Market access, transparency, and multilateral trade rules," Policy Research Working Paper Series 3195, The World Bank.
  2. Auriol, E., 1998. "Corruption in Procurement and Public Purchase," G.R.E.Q.A.M. 98a29, Universite Aix-Marseille III.
  3. Stein, William E, 2002. " Asymmetric Rent-Seeking with More Than Two Contestants," Public Choice, Springer, vol. 113(3-4), pages 325-36, December.
  4. Vagstad, Steinar, 1995. "Promoting fair competition in public procurement," Journal of Public Economics, Elsevier, vol. 58(2), pages 283-307, October.
  5. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
  6. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  7. James A. Brander & Barbara J. Spencer, 1980. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Working Papers 414, Queen's University, Department of Economics.
  8. Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
  9. Richard Cornes & Roger Hartley, 2002. "Asymmetric Contests with General Technologies," Keele Economics Research Papers KERP 2002/22, Centre for Economic Research, Keele University.
  10. Branco, Fernando, 1994. "Favoring domestic firms in procurement contracts," Journal of International Economics, Elsevier, vol. 37(1-2), pages 65-80, August.
  11. Mougeot, Michel & Naegelen, Florence, 2005. "A political economy analysis of preferential public procurement policies," European Journal of Political Economy, Elsevier, vol. 21(2), pages 483-501, June.
  12. Federico Trionfetti, 2000. "Discriminatory Public Procurement and International Trade," The World Economy, Wiley Blackwell, vol. 23(1), pages 57-76, 01.
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