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

Claudio Ferraz, Frederico Finan and Dimitri Szerman

No 21219, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F14 F66 J21 O1 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-bec and nep-lma
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Citations: View citations in EconPapers (63)

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Working Paper: Procuring Firm Growth: The Effects of Government Purchases on Firm Dynamics (2015)
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