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Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States †

Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US... 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 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Macroeconomics American Economic Association

Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States †

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Publisher
American Economic Association
Copyright
Copyright © 2016 by the American Economic Association
Subject
Articles
ISSN
1945-7715
eISSN
1945-7715
DOI
10.1257/mac.20130069
Publisher site
See Article on Publisher Site

Abstract

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 )

Journal

American Economic Journal: MacroeconomicsAmerican Economic Association

Published: Apr 1, 2016

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