We find that this effect is persistent, which implies that firms increase their credit beyond the duration of the procurement contract <!-- Start of picture text --> −1 0 1 2 3 4 −1 0 1 2 3 4 −1 0 1 2 3 4<br>years since procurement shock years since procurement shock years since procurement shock<br>(a) total credit (b) non-collateral credit (c) collateral credit<br>.1 .1 .1<br>.08 .08 .08<br>.06 .06 .06<br>.04 .04 .04<br>.02 .02 .02<br>cumulative growth rate cumulative growth rate cumulative growth rate<br>0 0 0<br>−.02 −.02 −.02<br><!-- End of picture text -->

**Notes:** This figure shows the cumulative impact of the estimate of _β_ 2<sup>_h_fromregression(1)fordifferenttimehorizons</sup> _h_ = 0 _,_ 1 _,_ 2 _,_ 3 _,_ 4, as well as its 5% confidence intervals. Panel (a) shows the results for the case of _x_ being firms’ total credit. Panel (b) shows the results for the case of _x_ being firms’ non-collateralized credit. Panel (c) shows the results for the case of _x_ being firms’ collateralized credit. As mentioned above, we have run these regressions with around 12,000 firms that have at least one contract during the sample period. Standard errors clustered at the firm level.

**Figure 1.** Procurement effect on credit

We also find that the effect on impact is entirely driven by non-collateralized credit: the effect on non-collateralized and collateralized credit is around 8 and 0 percentage points, respectively, when _h_ = 0 (see panels (b) and (c) of Figure 1). Finally, we find that, although absent on impact, the effect of procurement on collateralized credit gets bigger over time. For example, the 5 years ( _h_ = 4) cumulative effect is around 6 percentage points. This final result is consistent with the idea that firms use their extra profits earned in procurement to increase their net worth and therefore increase their borrowing capacity in the future.

An alternative explanation for the estimated “persistent” effect of procurement on credit is that obtaining a contract in a given year may increase the probability of obtaining more contracts in the subsequent periods. While it is true that there is persistence in procurement, in Appendix B.1 we show that the persistent effect of procurement on credit in credit is very similar for a subsample of firms that only obtain one contract during our sample period. Finally, a limitation of our procurement data is that it does not contain information about the duration of each contract. One potential concern is that the estimated “persistent” effect of procurement on credit results from long contracts. To have a sense of the duration of contracts in Spain, we use a different dataset, Tenders Electronic Daily (TED), which provides information on the estimated length of contracts.<sup>11</sup> For the years 2018-2019, for example, around 75% of the contracts have a duration of one year or less, 89% have a duration of two years or less, and 93% have a duration of three years or less (see Appendix B.5 for details). These numbers likely represent an upper bound, given that

> 11TED is the online version of the supplement to the Official Journal of the EU dedicated to European public procurement. See Garc ́ıa-Santana and Santamar ́ıa (2022) for details.

8