Does Buyer Discretion Facilitate Home Bias in Procurement? Cross-Border Procurement of Medical Supplies under COVID-19

Abstract

International public procurement sees low shares of cross-border purchases despite agreements against national preferencing. Introducing a unique dataset of contract awards for medical supplies in 27 European countries 2018 - 2020, we find a large, temporary surge in cross-border awards as the net effect of the COVID-19 pandemic and targeted deregulation. Two difference-in-differences regressions identify effects of crisis urgency and increased buyer discretion on cross-border procurement. The effects are economically large, as deregulation (a one-standard deviation increase in infection rates) increases the share of cross-border awards by 35.7 (19.3) percentage points over a baseline of 1.5 percent.

Note:
Funding Information: Funding by the German Academic Exchange Service is gratefully acknowledged.

Conflict of Interests: None to declare.

Keywords: public procurement, home bias, regulation, difference-in-differences, COVID-19

JEL Classification: H12, H57, L51