Effects of Government Spending on Employment: Evidence from Winners and Runners-Up in Procurement Auctions

46 Pages Posted: 30 May 2018

See all articles by Michael Weichselbaumer

Michael Weichselbaumer

Vienna University of Economics and Business

Klaus Peter Gugler

Vienna University of Economics and Business; European Corporate Governance Institute (ECGI)

Christine Zulehner

University of Vienna - Faculty of Business, Economics, and Statistics; Telecom ParisTech; Austrian Institute of Economic Research (WIFO); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2018

Abstract

To estimate demand for labor, we use a combination of detailed employment data and the outcomes of procurement auctions, and compare the employment of the winner of an auction with the employment of the second ranked firm (i.e. the runner-up firm). Assuming similar ex-ante winning probabilities for both firms, we may view winning an auction as an exogenous shock to a firm’s production and its demand for labor. We utilize daily data from almost 900 construction firms and about 3,000 auctions in Austria in the time period 2006 until 2009. Our main results show that the winning firm significantly increases labor demand in the weeks following an auction but only in the years before the recent economic crisis. It employs about 80 workers more after the auction than the runner-up firm. Most of the adjustment takes place within one month after the demand shock. Winners predominantly fire fewer workers after winning than runner-up firms. In the crisis, however, firms do not employ more workers than their competitors after winning an auction. We discuss explanations like labor hoarding and productivity improvements induced by the crisis as well discuss implications for fiscal and stimulus policy in the crisis.

Keywords: labor demand, labor hoarding, construction procurement, first-price auctions, recent economic crisis, regression discontinuity design

JEL Classification: D44, L10, L13

Suggested Citation

Weichselbaumer, Michael and Gugler, Klaus Peter and Zulehner, Christine, Effects of Government Spending on Employment: Evidence from Winners and Runners-Up in Procurement Auctions (May 2018). SAFE Working Paper No. 213. Available at SSRN: https://ssrn.com/abstract=3187331 or http://dx.doi.org/10.2139/ssrn.3187331

Michael Weichselbaumer

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Klaus Peter Gugler

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

HOME PAGE: http://www.wu.ac.at/iqv/mitarbeiter/gugler

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Christine Zulehner (Contact Author)

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Oskar-Morgenstern-Platz 1
Wien, 1090
Austria

HOME PAGE: http://homepage.univie.ac.at/christine.zulehner

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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