Can Government Demand Stimulate Private Investment? Evidence from U.S. Federal Procurement

Released on by Shafik Hebous
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  • Can Government Demand Stimulate Private Investment? Evidence from U.S. Federal Procurement Book Detail

  • Author : Shafik Hebous
  • Release Date : 2016-03-10
  • Publisher : International Monetary Fund
  • Genre : Business & Economics
  • Pages : 33
  • ISBN 13 : 1513578146
  • File Size : 74,74 MB
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Can Government Demand Stimulate Private Investment? Evidence from U.S. Federal Procurement by Shafik Hebous PDF Summary

Book Description: We study the effects of federal purchases on firms’ investment using a novel panel dataset that combines federal procurement contracts in the United States with key financial firm-level information. We find that 1 dollar of federal spending increases firms’ capital investment by 7 to 11 cents. The average effect masks heterogeneity: Effects are stronger for firms that face financing constraints and they are close to 0 for unconstrained firms. In line with the financial accelerator model, our findings indicate that the effect of government purchases works through easing firms’ access to external borrowing. Furthermore, industry-level analysis suggests that that the increase in investment at the firm level translates into an industry-wide effect without crowding-out capital investment of other firms in the same industry.

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