Stjepan Srhoj, Senior Research Associate at IRMO, has published a CEPR Discussion Paper on the economics of public procurement, co-authored with Francesco Decarolis of Bocconi University.
The authors argue that the economics of public procurement satisfies Abbott’s criteria for a distinct subfield of economics. They define it as follows: “The economics of public procurement is an applied subfield of economics that studies how procurement rules, and the decisions of public buyers and bidders, shape outcomes before contract award (e.g. participation, bids, contract terms) and after award (contract execution and performance), and how these outcomes in turn affect firms, markets, and broader economic impacts.”
In the paper, the authors summarize the key empirical and theoretical contributions in the economics of public procurement and organize them within a five-stage procurement cycle, allowing findings from the literature to be compared and linked across the entire process, from planning to economic consequences.
The five stages of the public procurement cycle used by the authors as an analytical framework are:
- Needs planning
- Tender preparation and publication
- Competition and contract award
- Contract execution
- Economic consequences
Public procurement is important because it is the channel through which public funds—often including EU funds—are transformed into tangible infrastructure and services, while simultaneously shaping markets, competition, and development outcomes.
Public procurement accounts for around 15% of GDP, yet despite its size, empirical evidence on what actually works in public procurement remains relatively limited. The authors therefore call for the systematic development of an empirical evidence base on “what works in public procurement” to support better policymaking.
CEPR link: https://cepr.org/publications/dp21110
CEPR is an international network of leading economists and researchers that promotes independent, empirically grounded research on economic policy, with the aim of informing public debate and decision-making in Europe and beyond.
SSRN link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5968455
