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Impact of Grading System on Efficiency of Government Procurement

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  • Sato, Takashi

Abstract

Japanʼs government procurement follows a grading system. The system ranks firms according to their size and technical level, limiting their opportunities to participate in auctions. We empirically verify whether the grading system affects procurement cost of scoring auctions, using the case of the Chugoku Regional Development Bureau from FY2013, when grade classifications were first integrated. A Difference-indifferences analysis reveals two effects. First, integrating grades decreases procurement cost by 1.7%. Second, this decrease in procurement cost is seen only for the former higher grades, not for the former lower grades.

Suggested Citation

  • Sato, Takashi, 2022. "Impact of Grading System on Efficiency of Government Procurement," Economic Review, Hitotsubashi University, vol. 73(3), pages 193-209, July.
    • Handle: RePEc:hit:ecorev:v:73:y:2022:i:3:p:193-209
    DOI: 10.15057/74217
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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