Working Paper

Procuring Survival

Matilde Cappelletti, Leonardo M. Giuffrida, Gabriele Rovigatti
CESifo, Munich, 2022

CESifo Working Paper No. 10124

We investigate the impact of public procurement spending on business survival. Using Italy as a laboratory, we construct a large-scale dataset on firms—covering balance-sheet, income-statement, and administrative records—and match it with public contract data. Employing a regression discontinuity design for close-call procurement auctions, we find that winners are more likely to stay in the market than marginal losers after the award and that the boost in survival chances lasts longer than the contract duration. We document that this effect is associated with earnings substitution rather than increased business scale. Regardless of size, contracts that are long-lasting and awarded by decentralized buyers are more impactful for survival prospects. Survivors experience no productivity premium but rather an improvement in their credit position.

CESifo Category
Public Finance
Industrial Organisation
Keywords: firm survival, firm dynamics, public demand, public procurement, demand shocks, productivity, credit, auctions, regression discontinuity design
JEL Classification: D250, D440, H320, H570