Indirect Savings from Public Procurement Centralization

Centralization of public procurement can lower prices for the government’s direct purchase of goods and services. This paper focuses on indirect savings. Public administrations that do not procure directly through a central procurement agency might benefit from the availability of centrally-procured goods. We exploit the introduction of a central purchasing agency in Italy and find that prices came down by 22% among administrations that bought autonomously. These indirect effects appear to be driven by informational externalities, especially for less competent public buyers purchasing technologically more complex goods. Accounting for indirect savings increases the estimate of direct ones.

Keywords: centralization, informational externalities, procurement, public contracts

JEL Classification: D440, H110, H570, H830, L380, L880

Suggested Citation: Suggested Citation

Lotti, Clarissa and Muço, Arieda and Spagnolo, Giancarlo and Valletti, Tommaso, Indirect Savings from Public Procurement Centralization (2023). CESifo Working Paper No. 10274, Available at SSRN: https://ssrn.com/abstract=4359380 or http://dx.doi.org/10.2139/ssrn.4359380