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Indirect Savings from Public Procurement Centralization

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  • Lotti, Clarissa
  • Muco, Arieda
  • Spagnolo, Giancarlo
  • Valletti, Tommaso

Abstract

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.

Suggested Citation

  • Lotti, Clarissa & Muco, Arieda & Spagnolo, Giancarlo & Valletti, Tommaso, 2022. "Indirect Savings from Public Procurement Centralization," CEPR Discussion Papers 17019, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17019
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    More about this item

    Keywords

    Centralization; Informational externalities; Procurement; Public contracts;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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