Government procurement and resource misallocation: Evidence from China

Jing Hang, Chaoqun Zhan*

*Corresponding author for this work

Research output: Contribution to journalJournal articlepeer-review

Abstract

Government often acts as the largest buyer in an economy through government procurement. The allocation of procurement orders however is often distorted. We build a model with heterogeneous firms endogenously seeking government favors in procurement to show that misallocation of procurement orders further leads to misallocation of production factors. Using the enactment of the <Chinese Government Procurement Law> in 2003 as a natural experiment, we find that tighter regulation of procurement in China lowers the extent of resource misallocation in industries that rely more on government procurement. We further provide firm-level evidence in support of our model.

Original languageEnglish
Pages (from-to)568-589
Number of pages22
JournalJournal of Economic Behavior and Organization
Volume216
Early online date7 Nov 2023
DOIs
Publication statusPublished - Dec 2023

Scopus Subject Areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

User-Defined Keywords

  • Government procurement
  • Resource misallocation
  • Corruption

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