Macroeconomic effects of cost savings in public procurement
The paper analyses the macroeconomic gain from cost savings in public procurement in an extended version of QUEST III. Labour tax cuts in response to cost savings from cheaper procurement (0.5 pp mark-up decline per year over 10 years and 20% of procurement) raise GDP, employment and consumption by 0.1% after 5 and 0.1-0.2% after 50 years. Alternative policies, such as lower capital taxes and higher public investment, have comparable or stronger long-run GDP effects, lower or comparable consumption effects, and zero employment effects. Supply expansion under lower capital taxes and higher public investment derives from higher investment. Benefits are approximately linear to the size of cost savings and depend on key parameters, such as the elasticity of labour supply or the productivity of public capital.
|Date of creation:||Nov 2009|
|Contact details of provider:|| Postal: Inter-institutional relations and communication Unit, B-1049 Brussels|
Fax: +32 2 298.08.23
Web page: https://ec.europa.eu/info/departments/economic-and-financial-affairs_en
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:euf:ecopap:0389. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ECFIN INFO)
If references are entirely missing, you can add them using this form.