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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. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
  2. Federico Trionfetti, 2000. "Discriminatory Public Procurement and International Trade," The World Economy, Wiley Blackwell, vol. 23(1), pages 57-76, 01.
  3. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-89, August.
  4. Charles Rowley & Anne Rathbone, 2004. "Political Economy of Antitrust," Chapters, in: The International Handbook of Competition, chapter 6 Edward Elgar Publishing.
  5. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  6. Vagstad, Steinar, 1995. "Promoting fair competition in public procurement," Journal of Public Economics, Elsevier, vol. 58(2), pages 283-307, October.
  7. Evenett, Simon J & Hoekman, Bernard, 2003. "Government Procurement: Market Access, Transparency, and Multilateral Trade Rules," CEPR Discussion Papers 4109, C.E.P.R. Discussion Papers.
  8. Auriol, Emmanuelle, 2006. "Corruption in procurement and public purchase," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 867-885, September.
  9. Stein, William E, 2002. "Asymmetric Rent-Seeking with More Than Two Contestants," Public Choice, Springer, vol. 113(3-4), pages 325-36, December.
  10. Branco, Fernando, 1994. "Favoring domestic firms in procurement contracts," Journal of International Economics, Elsevier, vol. 37(1-2), pages 65-80, August.
  11. Richard Cornes & Roger Hartley, 2005. "Asymmetric contests with general technologies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(4), pages 923-946, November.
  12. 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.
  13. Nti, Kofi O, 1999. "Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
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