Government procurement and corporate employment

This paper studies the effect of government procurement on corporate employment by utilizing the combination of government contracts and listed company data. Our study demonstrates that government procurement exerts a significant promoting effect on corporate employment. This effect is more pronounced in firms with higher financial constraints, and firms in the growth cycle. Mechanism tests show that liquidity constraints and credit access serve as two critical mechanisms. Further analysis shows that corporate employment is typically influenced by the procurements that come from central government, local government and sustained procurements. Besides, government procurement significantly raises firms’ investment, human capital and sales revenue. Our findings shed light on how fiscal and stimulus policies increase employment and investment.