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

This paper tests whether demand shocks affect firm dynamics. We examine whether

firms that win government procurement contracts grow more compared to firms that

compete for these contracts but do not win. We assemble a comprehensive data set

combining matched employer-employee data for the universe of formal firms in Brazil

with the universe of federal government procurement contracts over the period of

2004 to 2010. Exploiting a quasi-experimental design, we find that winning at least

one contract in a given quarter increases firm growth by 2.2 percentage points over

that quarter, with 93% of the new hires coming from either unemployment or the informal

sector. These effects also persist well beyond the length of the contracts. Part

of this persistence comes from firms participating and wining more future auctions, as

well as penetrating other markets

 

Texto para discussão no. 639

2015

Claudio Ferraz, Frederico Finan, Dimitri Joe de Alencar Szerman.

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