The Heterogeneous Pollution Abatement Effects of Green Public Procurement

The paper presented in this PRICE-Seminar provides novel evidence of the effects of green public procurement (GPP) on pollution abatement investments by manufacturing firms. Using a stagged difference-in-differences design that compares public procurement suppliers, the author shows that the first competitive GPP win has heterogeneous effects by firm and investment type. GPP increases cleaner production investments by ‘dirtier’ more regulated firms, whereas ‘cleaner’ firms increase investments in end-of-pipe solutions. GPP wins have no significant effect on investments by SMEs and more financially constrained firms. Besides the direct effects on investment, competitive GPP wins also increase the likelihood of obtaining government financial support, especially compared to firms that do not serve the public procurement market. The findings illustrate that GPP can have an effective use on top of environmental regulation, towards both clean and dirty firms, and can function as a signalling device for firms to attract finance earmarked for societal purposes.