Government-Firm Relationships during COVID-19

This project builds on an existing PEDL project - Information Frictions in Government-Firm Relationships. This project was created in partnership with Uganda's Public Procurement and Disposal of Assets Authority (PPDA) to study the role of information in public procurement. Through conversations with this partner to understand the situation in Uganda, a lack of data on government providers was identified as one of the bottlenecks for PPDA’s response to the coronavirus crisis. Building upon the existing research infrastructure, Emanuele Colonnelli et al. plan to add two rounds of data collection to this large-scale project to improve their understanding of challenges faced by firms in the current crisis and how they are responding to them. Specifically, their research aims at answering the following questions:

  1. How are firms impacted by this crisis in a developing context?
  2. Are firms involved in public procurement affected differently?
  3. How do firms respond (in terms of labor and capital allocation, wage setting, changes in their supply chain etc.)?
  4. Do we observe differences across sectors and firms sizes?

As part of the main project's RCT, the reserachers have already conducted two rounds of data collection on a sample of 3,049 firms: a baseline survey in the summer of 2019 and a phone survey in February/March 2020. In the first of two new rounds, they will gather information on three main areas: i) general challenges faced by the firm, including questions about drops in demand, disruption of supply chains, increased prices, mobility limitations etc.; ii) changes in firm behavior during the lockdown, in terms of layoffs, wage cuts, closures, remote working, cancellation of orders etc.; and iii) public procurement activity during the state of emergency (namely, whether they have received new orders from existing contracts, been requested quotations, if they have been paid arrears etc.). In the second round, to be implemented approximately two months after the first, the reserachers plan to collect updated data on basic economic indicators to observe changes over time in firms’ performance and measure survival rates. The sample includes mostly medium-size firms operating in a wide variety of sectors.

Thanks to close collaboration with the PPDA, this research will have direct policy incidence by assisting the authority with insights to adapt procurement guidelines to the current situation to mitigate the negative effects of the COVID-19 pandemic on firms. At the same time, this research will feed into budgeting decisions of public entities, that we will be able to reach, and stay informed through, PPDA’s infrastructure. The study pays special attention to government-firm relationships, and how public contracts may influence the performance of firms during a time of crisis. Understanding this impact and the changes in firm behavior is crucial for governments to allocate expenditures accordingly and design policy solutions tailored to effectively support strategic or severely hit sectors. Lastly, the project contributes significantly to the currently small literature on the effect of shocks on firms in developing countries.

Authors

Emanuele Colonnelli

University of Chicago

Javier Delgado

University of Chicago

Francesco Loiacono

Stockholm University

Edoardo Teso

Northwestern University