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We set up a novel dataset for Italy combining i) balance sheet and income statement data on the universe of limited liability companies with ii) firm administrative records on market entry and exit and iii) the quasi-universe of public contracts. A procurement-firm puzzle arises: Holding the sector, region, or year fixed and controlling for size, age, and productivity, firms that receive public contracts survive longer. To identify the effect of public demand on firm survival, we rely on bid distribution to inform a regression discontinuity analysis. We find that the survival rate of winners relative to marginal losers is three p.p. (or 75%) higher after 36 months—two and a half years beyond the expiration of the median contract. We argue that this effect is long-lasting and goes beyond an earnings boost—a higher share of revenues from public agencies is a mechanism at stake. Public demand does not affect the productivity dynamics of survivors; it makes their future earnings increasingly dependent on public contracts and raises their financial leverage.
This paper investigates whether there is evidence of ex-ante moral hazard in health insurance—i.e., whether lower out-of-pocket costs lead to risky health behaviors. Understanding the role of ex-ante moral hazard is crucial, given that it can contribute to preventable health issues. I leverage the staggered rollout of U.S. state policies lowering insulin out-of-pocket costs and focus on privately insured households with diabetes. Using household-level grocery purchase data, I find that reduced insulin out-of-pocket costs result in increased purchases of sugar, a nutrient closely tied to insulin needs and linked to long-term health risks. Sales of diabetes supplies also rise, highlighting a shift from lifestyle management to treatment.
A set-aside promotes a more equitable procurement process by restricting participation in government tenders to small or disadvantaged businesses. Yet its micro-effects on tender outcomes (competition and contract efficiency) and targeted firm performance entail trade-offs, which we evaluate empirically using a decade of US federal procurement data. At the tender level, we employ a two-stage approach. First, we use random forest techniques to compute the propensity score for a tender being set aside based on rules implementation. Second, we employ the scores in an inverse probability weighting framework. We find that set-asides prompt more competition—implying that the rise in participation of targeted firms more than offsets the exclusion of untargeted ones—and inefficiency, measured by cost overruns and delays. We argue that adverse selection and moral hazard are mechanisms behind contract inefficiency. We then study the targeted firm behavior to uncover whether long-run benefits mitigate short-run drawbacks. We compare businesses differentially exposed to a set-aside spending shock through an event study framework. We find mixed evidence on firm growth.
Governments approve climate change legislation while simultaneously spending a large share of their budgets purchasing goods and services from private firms. It is unclear whether this spending is aligned with their own climate goals. Using a novel dataset spanning 2015--2024 that combines the universe of Italian procurement contracts with firm-level financial data and a measure of green investment intensity, we study the effect of public procurement on firms' green investments. We find that higher reliance on public procurement leads to lower green investment. Firms securing revenues from a government buyer that does not condition demand on environmental performance are insulated from market-based decarbonization pressure. This effect is stronger in high-decarbonization pressure periods and for firms that are less financially constrained.