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 language | English |
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Pages (from-to) | 568-589 |
Number of pages | 22 |
Journal | Journal of Economic Behavior and Organization |
Volume | 216 |
Early online date | 7 Nov 2023 |
DOIs | |
Publication status | Published - Dec 2023 |
Scopus Subject Areas
- Economics and Econometrics
- Organizational Behavior and Human Resource Management
User-Defined Keywords
- Government procurement
- Resource misallocation
- Corruption