Public Procurement as a Demand-Side Policy: Project Competition and Innovation Incentives

46 Pages Posted: 16 Apr 2019

See all articles by Alessandro De Chiara

Alessandro De Chiara

Central European University (CEU) - Department of Economics

Elisabetta Iossa

University of Rome Tor Vergata; IEFE Bocconi University

Date Written: April 2019

Abstract

We develop a model of project competition to compare two alternative and widely used approaches: (i) A (demand-side) procurement approach, in which the public authority specifies the type of project it will finance and (ii) a (supply-side) grant system, in which any type of project can be funded. The public authority can verify the characteristics of the projects submitted, but does not know which other projects are available. The paper sheds light on the role of public procurement to foster innovation.

Keywords: Crowding out, innovation policy, Procurement, Research and Development, Steering effect

JEL Classification: D8, H57, L2, O31, O38

Suggested Citation

De Chiara, Alessandro and Iossa, Elisabetta, Public Procurement as a Demand-Side Policy: Project Competition and Innovation Incentives (April 2019). CEPR Discussion Paper No. DP13664. Available at SSRN: https://ssrn.com/abstract=3372863

Alessandro De Chiara (Contact Author)

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary

Elisabetta Iossa

University of Rome Tor Vergata ( email )

Via Columbia n.2
Rome, 00133
Italy

IEFE Bocconi University ( email )

Via Roentgen 1
Milan, Milan 20136
Italy

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