Understanding Home Bias in Procurement : Evidence from National and Subnational Governments

Are governments locally biased when buying goods and services Can this home bias explain the lowintegration of procurement markets Using one million procurement contracts awarded in France and Spain, thispaper explores whether the home bias follows the government's geographical scope: national governmentshave a national bias, while subnational governments have a local bias. The relative home bias across governments isestimated by comparing how local and non-local establishments sell the same product to national andsubnational governments in the same destination. This paper finds that the governments’ home bias explains a big part ofthe high local concentration in procurement.