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Procuring Firm Growth: The Effects of Government Purchases on Firm Dynamics

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  • Claudio Ferraz
  • Frederico Finan
  • Dimitri Szerman

Abstract

This paper tests whether demand shocks affect firm dynamics. We examine whether firms that win government procurement contracts grow more compared to firms that compete for these contracts but do not win. We assemble a comprehensive data set combining matched employer-employee data for the universe of formal firms in Brazil with the universe of federal government procurement contracts over the period of 2004 to 2010. Exploiting a quasi-experimental design, we find that winning at least one contract in a given quarter increases firm growth by 2.2 percentage points over that quarter, with 93% of the new hires coming from either unemployment or the informal sector. These effects also persist well beyond the length of the contracts. Part of this persistence comes from firms participating and wining more future auctions, as well as penetrating other markets.

Suggested Citation

  • Claudio Ferraz & Frederico Finan & Dimitri Szerman, 2015. "Procuring Firm Growth: The Effects of Government Purchases on Firm Dynamics," NBER Working Papers 21219, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:21219
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    Cited by:

    1. Jonas Hjort & Jonas Poulsen, 2017. "The Arrival of Fast Internet and Employment in Africa," NBER Working Papers 23582, National Bureau of Economic Research, Inc.
    2. Ana Miranda, 2019. "Compras públicas de alimentos a pequeños agricultores: revisión bibliográfica y buenas prácticas," Working Papers Spanish 176, International Policy Centre for Inclusive Growth.
    3. repec:eee:deveco:v:135:y:2018:i:c:p:461-477 is not listed on IDEAS
    4. repec:eee:tefoso:v:143:y:2019:i:c:p:214-223 is not listed on IDEAS
    5. Ana Miranda, 2018. "Public food procurement from smallholder farmers: literature review and best practices," Working Papers 176, International Policy Centre for Inclusive Growth.
    6. Shafik Hebous & Tom Zimmermann, 2016. "Can Government Demand Stimulate Private Investment? Evidence from U.S. Federal Procurement," IMF Working Papers 16/60, International Monetary Fund.
    7. Hoekman, Bernard & Sanfilippo, Marco, 2018. "Firm performance and participation in public procurement: Evidence from Sub-Saharan Africa," CEPR Discussion Papers 12752, C.E.P.R. Discussion Papers.
    8. Jean-Noel Barrot & Ramana Nanda, 2016. "The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform," Harvard Business School Working Papers 17-004, Harvard Business School, revised Jul 2018.
    9. Chauvet, Lisa & Ehrhart, Hélène, 2018. "Aid and growth: evidence from firm-level data," Journal of Development Economics, Elsevier, vol. 135(C), pages 461-477.

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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