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

56 Pages Posted: 1 Jun 2015 Last revised: 16 Jun 2015

See all articles by Claudio Ferraz

Claudio Ferraz

University of California, Berkeley - Department of Agricultural & Resource Economics; Institute of Applied Economic Research (IPEA)

Frederico Finan

University of California, Berkeley - Department of Economics; IZA Institute of Labor Economics

Dimitri Szerman

Pontifical Catholic University of Rio de Janeiro (PUC-Rio)

Date Written: May 2015

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

Ferraz, Claudio and Finan, Frederico and Szerman, Dimitri, Procuring Firm Growth: The Effects of Government Purchases on Firm Dynamics (May 2015). NBER Working Paper No. w21219, Available at SSRN: https://ssrn.com/abstract=2612774

Claudio Ferraz (Contact Author)

University of California, Berkeley - Department of Agricultural & Resource Economics ( email )

Berkeley, CA 94720
United States

Institute of Applied Economic Research (IPEA) ( email )

Av. Presidente Antonio Carlos 51
16 andar, Castelo
RJ 20020-010 Rio de Janeiro
Brazil
+55 21 3804-8000 (Phone)
+55 21 2240-1920 (Fax)

Frederico Finan

University of California, Berkeley - Department of Economics ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Dimitri Szerman

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) ( email )

Brazil

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
15
Abstract Views
346
PlumX Metrics