Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States
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Abstract
Governments purchase everything from airplanes to zucchini. This paper investigates the role of the technological content of government procurement in innovation. In a theoretical model, we first show that a shift in the composition of public purchases toward high-tech products translates into higher economy-wide returns to innovation, leading to an increase in the aggregate level of private R&D. Using unique data on federal procurement in US states and performing panel fixed-effects estimations, we find support for the model's prediction of a positive R&D effect of the technological content of government procurement. Instrumental-variable estimations suggest a causal interpretation of our findings. (JEL H57, H76, O31, O32, O38)Citation
Slavtchev, Viktor, and Simon Wiederhold. 2016. "Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States." American Economic Journal: Macroeconomics, 8 (2): 45-84. DOI: 10.1257/mac.20130069Additional Materials
JEL Classification
- H57 National Government Expenditures and Related Policies: Procurement
- H76 State and Local Government: Other Expenditure Categories
- O31 Innovation and Invention: Processes and Incentives
- O32 Management of Technological Innovation and R&D
- O38 Technological Change: Government Policy
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