strands of the literatures in law and economics. An important body of research has sought to identify and quantify the effects of protectionism in procurement, both in terms of trade flows and efficiency.

Theoretical papers in economics have investigated the impact of protectionism in government procurement on trade patterns, production, and welfare. The first general equilibrium model of trade with ‘distorted’ public expenditure, proposed by Baldwin (1970), suggested that protectionism in government procurement would have no effect on trade flows and specialization, as consumers offset the government's shift towards domestic goods by importing more. However, subsequent research has shown that the impact of protectionism in government procurement is more nuanced in settings with differentiated goods (Miyagiwa 1991) and incomplete information (McAfee and McMillan 1989). Furthermore, when increasing returns to scale are allowed, trade barriers in government procurement can change the patterns of specialization and alter the agglomeration of economic activity (Brülhart and Trionfetti 2001; 2004). Home-biased government procurement, which decreases demand for foreign varieties, can lower the price of imported goods and increase the size of government spending. However, this comes at the cost of welfare, as cheap foreign varieties are replaced by more expensive domestic ones (Larch and Lechthaler 2013).

While the theoretical literature has largely assumed protectionism in government procurement, empirical work has attempted to identify the extent to which governments favor domestic firms over foreign ones in procurement contracts and how this behavior affects trade flows. We contribute to the literature that uses aggregated industry- and country-level data. Previous studies, such as those by Rickard and Kono (2014) and Gourdon and Messent (2019), have used aggregate trade and public spending data, without separating out cross-border procurement flows. These studies find that countries with higher government spending import less, suggesting the presence of protectionism in government procurement. Shingal (2011) finds evidence for home bias in procurement of services by Japan and Switzerland. We follow this strand of the literature by investigating the effects of variation in protectionist rules in government procurement across countries (irrespectively of whether this comes from participation in trade agreements) on trade openness.

The literature also examines the effects of trade reforms aimed at liberalizing procurement markets, such as the WTO GPA and of PTAs, using a gravity model for bilateral trade. The evidence is mixed, with the WTO GPA having a liberalizing role (in Rickard and Kono (2014) and Gourdon and Messent (2019), but no significant effect found by Shingal (2011; 2015) for Switzerland and Japan), but little effect found for PTAs. Chen and Whalley (2016) show that even when controlling for the share of procurement value that is above the thresholds where the provisions of the agreement apply, the WTO GPA has a positive impact on trade.

The estimates from these studies that employ gravity-like empirical specifications might be biased as they omit controls for price and country-level unobserved factors (multilateral resistance terms in the structural gravity model). Building on these shortcomings, Mulabdic and Rotunno (2022) employ a structural gravity model to estimate the effects of PTAs with provisions specific to government procurement, accounting for these omitted factors. Their findings confirm the previous evidence of a strong home-bias in government procurement, 4