Research
Research
Media Coverage (IT) - lavoce.info: Appalti che tengono in vita le imprese.
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.
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.