Public expenditure, international specialisation and agglomeration |
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Authors: | Marius Brülhart Federico Trionfetti |
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Institution: | a Département d’économétrie et économie politique, Ecole des HEC, University of Lausanne, CH-1015 Lausanne, Switzerland b CEPN-CNRS, University of Paris 13, F-93430 Paris, France c CEPII, F-75015 Paris, France |
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Abstract: | It is widely recognised that public-sector purchasers tend to favour domestic suppliers. We study the consequences of such home-biased public procurement on international specialisation. Using a general-equilibrium model with a monopolistically competitive sector, we find that a country will specialise in that sector if it has relatively large home-biased procurement (the “pull” effect). Furthermore, home-biased procurement can counter agglomeration forces in that sector and thereby attenuate the overall degree of international specialisation (the “spread” effect). Our empirical analysis, conducted on input-output data for the European Union, yields supporting evidence for the pull effect and some support for the spread effect. |
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Keywords: | H5 F1 R3 R15 |
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