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Procuring Firm Growth: The Effects of Government Purchases on Firm Dynamics

Author

Listed:
  • Claudio Ferraz

    (Department of Economics PUC-Rio)

  • Frederico Finan

    (Department of Economics, Berkeley University)

  • Dimitri Joe de Alencar Szerman

    (Núcleo de Avaliação de Políticas Climáticas, PUC-Rio)

Abstract

This paper tests whether demand shocks affect firm dynamics. We examine whetherfirms that win government procurement contracts grow more compared to firms thatcompete for these contracts but do not win. We assemble a comprehensive data setcombining matched employer-employee data for the universe of formal firms in Brazilwith the universe of federal government procurement contracts over the period of2004 to 2010. Exploiting a quasi-experimental design, we find that winning at leastone contract in a given quarter increases firm growth by 2.2 percentage points overthat quarter, with 93% of the new hires coming from either unemployment or the informalsector. These effects also persist well beyond the length of the contracts. Partof this persistence comes from firms participating and wining more future auctions, aswell as penetrating other markets

Suggested Citation

  • Claudio Ferraz & Frederico Finan & Dimitri Joe de Alencar Szerman, 2015. "Procuring Firm Growth: The Effects of Government Purchases on Firm Dynamics," Textos para discussão 639, Department of Economics PUC-Rio (Brazil).
    • Handle: RePEc:rio:texdis:639
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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