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)
"Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States."
American Economic Journal: Macroeconomics,
National Government Expenditures and Related Policies: Procurement
State and Local Government: Other Expenditure Categories
Innovation and Invention: Processes and Incentives
Management of Technological Innovation and R&D
Technological Change: Government Policy