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Public Procurement as a Demand-side Policy: Project Competition and Innovation Incentives

Author

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  • De Chiara, Alessandro
  • Iossa, Elisabetta

Abstract

We develop a model of project competition to compare two alternative and widely used approaches: (i) A (demand-side) procurement approach, in which the public authority specifies the type of project it will finance and (ii) a (supply-side) grant system, in which any type of project can be funded. The public authority can verify the characteristics of the projects submitted, but does not know which other projects are available. The paper sheds light on the role of public procurement to foster innovation.

Suggested Citation

  • De Chiara, Alessandro & Iossa, Elisabetta, 2019. "Public Procurement as a Demand-side Policy: Project Competition and Innovation Incentives," CEPR Discussion Papers 13664, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13664
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    References listed on IDEAS

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    2. Alessandro De Chiara & Elisabetta Iossa, 2019. "How to Set Budget Caps for Competitive Grants," CEIS Research Paper 448, Tor Vergata University, CEIS, revised 24 Jan 2019.
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    Cited by:

    1. Czarnitzki, Dirk & Hünermund, Paul & Moshgbar, Nima, 2020. "Public Procurement of Innovation: Evidence from a German Legislative Reform," International Journal of Industrial Organization, Elsevier, vol. 71(C).

    More about this item

    Keywords

    Crowding out; innovation policy; Procurement; Research and Development; Steering effect;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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