Trade barriers in government procurement

Abstract

This paper estimates trade barriers in government procurement, a market that accounts for 12 percent of world GDP. Using data from inter-country input–output tables in a gravity model, we find that home bias in government procurement is significantly higher than in trade between firms. However, this difference has decreased over time. Results also show that trade agreements with provisions on government procurement increase cross-border flows of services, whereas the effect on goods is small and not different from that in private markets. Provisions on transparency and procedural requirements are particularly instrumental in increasing cross-border government procurement.