Work

The public cost of economic policy uncertainty: Evidence from brazilian public procurements

Year: 2025

Type: article

Abstract: Using a comprehensive dataset of 939,684 procurement auctions from the Brazilian federal government between 2014 and 2018, I find that economic policy uncertainty (EPU) is significantly correlated with the cost-efficiency of public procurement. Specifically, a one-standard-deviation increase in EPU correlates with a 0.2 % increase in the price paid by public administration compared to the estimated price of the goods being procured. Results are replicated using data from 2024 to 2025. Although the number of bidders stay the same, in high EPU periods bidders bid more conservatively, especially in high-value auctions. All considered, a single month with elevated EPU (1 SD above the mean) is estimated to cost the federal government approximately 6.3 million Brazilian reais.

Source: Finance research letters

DOI: 10.1016/j.frl.2025.108665

Author: Rodrigo Leite

Institution: Universidade Federal do Rio de Janeiro

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,730

Funder: Fundação Carlos Chagas Filho de Amparo à Pesquisa do Estado do Rio de Janeiro