Indirect Savings from Public Procurement Centralization

40 Pages Posted: 2 Feb 2022

See all articles by Clarissa Lotti

Clarissa Lotti

University of Rome Tor Vergata

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Date Written: February 1, 2022

Abstract

An influential study by Bandiera, Prat and Valletti (2009) exploits the introduction of a central purchasing agency in Italy to identify the amount and sources of public waste. Among other findings, it estimates that purchasing through a central agency directly saves 28% on prices. We find that centralized prices also have significant indirect effects, leading to a 17.7% reduction among non-centralized ones. The indirect effects of centralization appear driven by informational externalities – rather than an improved outside option – on less competent public buyers purchasing more complex goods. Accounting for indirect savings also increases the estimate of direct ones.

Keywords: Centralization, Informational externalities, Procurement, Public Contracts

JEL Classification: D44, H11, H57, H83, L38, L88

Suggested Citation

Lotti, Clarissa and Spagnolo, Giancarlo, Indirect Savings from Public Procurement Centralization (February 1, 2022). CEIS Working Paper No. 532, Available at SSRN: https://ssrn.com/abstract=4023445 or http://dx.doi.org/10.2139/ssrn.4023445

Clarissa Lotti

University of Rome Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

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