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Border effects in European public procurement
[Information costs and home bias: an analysis of US holdings of foreign equities]

Author

Listed:
  • Benedikt Herz
  • Xosé-Luís Varela-Irimia

Abstract

In this paper, we document border effects in the award of public contracts in the European single market. We use a dataset of 1.8 million contract awards, which we match to geolocations to estimate a gravity model of procurement flows between European NUTS3 region pairs. We find very sizable cross-national border effects for all types of goods and services, even after controlling for physical distance, currency, cultural differences and other variables. For example, ‘local’ bidders for IT services contracts are almost 250 times more likely to be awarded a contract than ‘foreign’ bidders. More surprisingly, we find substantial cross-regional border effects within countries. While we document that firms’ bidding decisions are subject to border effects, we cannot exclude a home bias of contracting authorities in the award of public contracts.

Suggested Citation

  • Benedikt Herz & Xosé-Luís Varela-Irimia, 2020. "Border effects in European public procurement [Information costs and home bias: an analysis of US holdings of foreign equities]," Journal of Economic Geography, Oxford University Press, vol. 20(6), pages 1359-1405.
    • Handle: RePEc:oup:jecgeo:v:20:y:2020:i:6:p:1359-1405.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbaa001
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    Cited by:

    1. Marta Santamaría & Jaume Ventura & Uğur Yeşilbayraktar, 2020. "Borders within Europe," Economics Working Papers 1763, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2024.
    2. Zornitsa Kutlina-Dimitrova, 2018. "Government procurement: data, trends and protectionist tendencies," DG TRADE Chief Economist Notes 2018-3, Directorate General for Trade, European Commission.
    3. Santamaria, Marta & Ventura, Jaume & Yesilbayraktar, Ugur, 2021. "Borders within Europe," CAGE Online Working Paper Series 560, Competitive Advantage in the Global Economy (CAGE).
    4. Li, Jidong & Yuan, Cheng & Huang, Zhichun, 2025. "Invest to win: A study of "Local bias jumping" in China," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    5. Matilde Bombardini & Andres Gonzalez-Lira, 2024. "The Increasing Cost of Buying American," CESifo Working Paper Series 11339, CESifo.
    6. Mulabdic, Alen & Rotunno, Lorenzo, 2022. "Trade barriers in government procurement," European Economic Review, Elsevier, vol. 148(C).
    7. Tamminen, Saara & Niemi, Janne & Nilsson Hakkala, Katariina, 2017. "The expected economic impacts of the EU-Canada Comprehensive Economic and Trade Agreement in Finland," Research Reports 187, VATT Institute for Economic Research.
    8. Ugur Yesilbayraktar & Marta Santamaría & Jaume Ventura, 2021. "Borders within Europe," Working Papers 1229, Barcelona School of Economics.
    9. TANG, Wei & WANG, Yuan & WU, Jiameng, 2025. "Local favoritism in China's public procurement: Information frictions or incentive distortion?," Journal of Urban Economics, Elsevier, vol. 145(C).
    10. Santamaría, Marta & Ventura, Jaume & Yesilbayraktar, Ugur, 2021. "Borders within Europe," The Warwick Economics Research Paper Series (TWERPS) 1355, University of Warwick, Department of Economics.
    11. Teresa Fayos & Haydeé Calderón & Juan Manuel García-García & Belén Derqui, 2022. "The upcoming rise of SMEs in cross-border public procurement: is it a matter of networking capabilities?," Journal of International Entrepreneurship, Springer, vol. 20(4), pages 537-563, December.
    12. Mura, Matteo & Longo, Mariolina & Toschi, Laura & Zanni, Sara & Visani, Franco & Bianconcini, Silvia, 2021. "The role of geographical scales in sustainability transitions: An empirical investigation of the European industrial context," Ecological Economics, Elsevier, vol. 183(C).
    13. Bedri Kamil Onur Tas, 2020. "Effect of public procurement regulation on competition and cost-effectiveness," Journal of Regulatory Economics, Springer, vol. 58(1), pages 59-77, August.
    14. Ventura, Jaume & Santamaria, Marta & YeÅŸilbayraktar, UÄŸur, 2021. "Borders within Europe," CEPR Discussion Papers 15633, C.E.P.R. Discussion Papers.
    15. Arozamena, Leandro & Ganuza, Juan-José & Weinschelbaum, Federico, 2023. "Renegotiation, discrimination and favoritism in symmetric procurement auctions," European Economic Review, Elsevier, vol. 159(C).

    More about this item

    Keywords

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    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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