Does E-Procurement Matter for Economic Growth? Subnational Evidence from Australia

Abstract

We examine the impact of e-procurement on economic growth. To this end, we exploit an ambitious implementation of large-scale mandatory e-procurement platform in New South Wales and Western Australia. By matching pre-reform growth dynamics and its covariates with the rest of the world, we provide a plausible source of variation in growth that allows us to build a counterfactual growth scenario in the hypothetical absence of the reform. Using more than 100 countries in country-state matched balanced sample, our evidence highlights a mixed impact of mandatory e-procurement on growth. We find that the institutional quality of governance and policy implementation underlines the magnitude of the growth effect. In particular, our findings contrast a significant positive impact of the mandatory e-procurement on the economic growth of Western Australia with a zero impact of the similar reform in New South Wales. We argue that this contrast arises from the differences in transaction costs, quality of governance, and strength of regulatory oversight that either foster or hamper the opportunities for corruption. The estimated impact of reform is robust across a multitude of spatial and temporal placebo studies, choice of samples and does not seem to be driven by pre-existing shocks or prevalent economic conditions.