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On specification and inference in the econometrics of public procurement
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.ORCID iD: 0000-0003-1312-8073
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

In Paper [I] we use data on Swedish public procurement auctions for internal regularcleaning service contracts to provide novel empirical evidence regarding green publicprocurement (GPP) and its effect on the potential suppliers’ decision to submit a bid andtheir probability of being qualified for supplier selection. We find only a weak effect onsupplier behavior which suggests that GPP does not live up to its political expectations.However, several environmental criteria appear to be associated with increased complexity,as indicated by the reduced probability of a bid being qualified in the postqualificationprocess. As such, GPP appears to have limited or no potential to function as an environmentalpolicy instrument. In Paper [II] the observation is made that empirical evaluations of the effect of policiestransmitted through public procurements on bid sizes are made using linear regressionsor by more involved non-linear structural models. The aspiration is typically to determinea marginal effect. Here, I compare marginal effects generated under both types ofspecifications. I study how a political initiative to make firms less environmentally damagingimplemented through public procurement influences Swedish firms’ behavior. Thecollected evidence brings about a statistically as well as economically significant effect onfirms’ bids and costs. Paper [III] embarks by noting that auction theory suggests that as the number of bidders(competition) increases, the sizes of the participants’ bids decrease. An issue in theempirical literature on auctions is which measurement(s) of competition to use. Utilizinga dataset on public procurements containing measurements on both the actual and potentialnumber of bidders I find that a workhorse model of public procurements is bestfitted to data using only actual bidders as measurement for competition. Acknowledgingthat all measurements of competition may be erroneous, I propose an instrumental variableestimator that (given my data) brings about a competition effect bounded by thosegenerated by specifications using the actual and potential number of bidders, respectively.Also, some asymptotic results are provided for non-linear least squares estimatorsobtained from a dependent variable transformation model. Paper [VI] introduces a novel method to measure bidders’ costs (valuations) in descending(ascending) auctions. Based on two bounded rationality constraints bidders’costs (valuations) are given an imperfect measurements interpretation robust to behavioraldeviations from traditional rationality assumptions. Theory provides no guidanceas to the shape of the cost (valuation) distributions while empirical evidence suggeststhem to be positively skew. Consequently, a flexible distribution is employed in an imperfectmeasurements framework. An illustration of the proposed method on Swedishpublic procurement data is provided along with a comparison to a traditional BayesianNash Equilibrium approach.

Place, publisher, year, edition, pages
Umeå: Umeå universitet , 2016. , 15 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 931
Keyword [en]
auctions, dependent variable transformation model, green public procurement, indirect inference, instrumental variable, latent variable, log-generalized gamma distribution, maximum likelihood, measurement error, non-linear least squares, objective effectiveness, orthogonal polynomial regression, prediction, simulation estimation, structural estimation
National Category
Economics
Research subject
Economics; Econometrics
Identifiers
URN: urn:nbn:se:umu:diva-121681ISBN: 978-91-7601-507-0 (print)OAI: oai:DiVA.org:umu-121681DiVA: diva2:933619
Public defence
2016-09-02, Hörsal D, Samhällsvetarhuset, Biblioteksgränd 6, Umeå, 13:15 (English)
Opponent
Supervisors
Available from: 2016-06-08 Created: 2016-06-07 Last updated: 2016-08-10Bibliographically approved
List of papers
1. Using Public Procurement to Implement Environmental Policy: An Empirical Analysis
Open this publication in new window or tab >>Using Public Procurement to Implement Environmental Policy: An Empirical Analysis
2015 (English)In: Environmental Economics and Policy Studies, ISSN 1432-847X, E-ISSN 1867-383X, Vol. 17, no 4, 487-520 p.Article in journal (Refereed) Published
Abstract [en]

Politicians expect Green public procurement (GPP) to serve as an environmental policy instrument. However, in order for GPP to work as an effective policy instrument it is important to take into consideration potential suppliers’ decisions to participate in the procurement process, the total number of bidders, and the screening of bidders with respect to mandatory green criteria. The aim of this paper is to empirically study GPP in this respect. The analysis presented here is based on data from Swedish cleaning services procurements that are unique in that they contain very detailed information on various environmental standards set by the contracting authorities. We find at best only a weak effect on supplier behavior, and this suggests that the use of GPP in this situation does not live up to its political expectations. 

Keyword
Public Procurement, Auctions, Environmental Policy, Green Public Procurement, Sustainability, Purchasing
National Category
Economics and Business Economics
Research subject
biology, Environmental Science
Identifiers
urn:nbn:se:umu:diva-98079 (URN)10.1007/s10018-015-0102-9 (DOI)2-s2.0-84942817185 (Scopus ID)
Projects
Green Public Procurement
Funder
Swedish Research Council
Available from: 2015-01-15 Created: 2015-01-15 Last updated: 2017-12-05Bibliographically approved
2. A comparison of techniques to evaluate policies in public procurement
Open this publication in new window or tab >>A comparison of techniques to evaluate policies in public procurement
2016 (English)Report (Other academic)
Abstract [en]

Empirical evaluations of policies implemented through public procurements are commonly carried out using linear regressions or by more involved non-linear structural models. The aspiration is typically to determine a marginal effect. Here, I compare marginal effects generated under both types of specifications. I study how a political initiative to make firms less environmentally damaging implemented through public procurements influences Swedish firms’ behavior. The collected evidence brings about statistically as well as economically significant effects on firms’ bids and costs.

Place, publisher, year, edition, pages
Umeå: Umeåa universitet, 2016. 25 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 928
Keyword
binding function, green public procurement, indirect inference, orthogonal polynomial regression, simulation estimation, structural estimation
National Category
Economics
Identifiers
urn:nbn:se:umu:diva-121688 (URN)
Available from: 2016-06-07 Created: 2016-06-07 Last updated: 2016-06-07Bibliographically approved
3. The Competition Effect in a Public Procurement Model: An error-in-variables approach
Open this publication in new window or tab >>The Competition Effect in a Public Procurement Model: An error-in-variables approach
2016 (English)Report (Other academic)
Abstract [en]

Auction theory suggests that as the number of bidders (competition) increases, the sizes of the participants’ bids decrease. An issue in the empirical literature on auctions is which measurement(s) of competition to use. Utilizing a dataset on public procurements containing measurements on both the actual and potential number of bidders I find that a workhorse model of public procurements is best fitted to data using only actual bidders as measurement for competition. Acknowledging that all measurements of competition may be erroneous, I propose an instrumental variable estimator that (given my data) brings about a competition effect bounded by those generated from models using the actual and potential number of bidders, respectively. Also, some asymptotic results are provided for non-linear least squares estimators obtained from a dependent variable transformation model.

Publisher
33 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 920
Keyword
dependent variable transformation model, instrumental variable, measurement error, non-linear least squares
National Category
Economics
Research subject
Econometrics; Economics
Identifiers
urn:nbn:se:umu:diva-114556 (URN)
Available from: 2016-01-25 Created: 2016-01-25 Last updated: 2016-06-07
4. It’s all in the interval: an imperfect measurements approach to estimate bidders’ primitives in auctions
Open this publication in new window or tab >>It’s all in the interval: an imperfect measurements approach to estimate bidders’ primitives in auctions
2014 (English)Report (Other academic)
Abstract [en]

A novel methodology to measure bidders’ costs (valuations) in descending (ascending) auctions is introduced. Based on two bounded rationality constraints bidders’ costs (valuations) are given an imperfect measurements interpretation that is robust to behavioral deviations from the traditional rationality assumptions. Theory provides no guidance as to the shape of the cost (valuation) distributions while empirical evidence suggests them to be positively skew. Consequently, a flexible distribution is employed in an imperfect measurements framework. An illustration of the proposed methodology on Swedish public procurement data is provided along with a comparison to a traditional Bayesian Nash Equilibrium methodology.

Place, publisher, year, edition, pages
Umeå: Umeå universitet, 2014. 21 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 899
Keyword
log-generalized gamma distribution, latent variable, maximum likelihood, prediction, public procurement
National Category
Economics
Research subject
Economics; Econometrics
Identifiers
urn:nbn:se:umu:diva-95896 (URN)
Available from: 2014-11-06 Created: 2014-11-06 Last updated: 2016-06-07Bibliographically approved

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