Spending and sharing: the relationship between municipal procurement and the labour share

We examine how public procurement relates to firms’ labour share. Combining Italian municipal procurement records with firm-level data, we find that higher per capita spending is associated with a modest but significant decline in the labour share, driven by productivity gains exceeding wage growth. This relationship varies across procurement categories, being negative in construction, facility and environmental services, and transport and administrative services, and positive in IT and digital services and goods and supplies. These findings suggest that municipal spending may redistribute income towards capital, though labour-related clauses could alter this pattern.