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The Macroeconomic Consequences of Green and Brown Government Spending

Working paper 866
Working Papers
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Gepubliceerd: 05 augustus 2026

Door: Fulvia Marotta Giorgio Rossetto Lennard Schlattmann

This paper estimates the macroeconomic effects of green and brown government spend-ing using public procurement data, focusing on how spending composition reshapes the energy sector. Classifying around 171,000 contracts by product codes, we con-struct a quarterly panel of green and brown procurement for ten Eurozone economies (2011–2023). We identify spending shocks using the institutional timing of contract award announcements, which is plausibly orthogonal to the business cycle, and es-timate impulse responses with panel local projections. Green and brown procure-ment have near mirror-image effects on the energy sector: green procurement lowers energy prices, reduces energy-sector output, and cuts oil import dependence, while brown procurement raises energy prices and depresses innovation, especially green patenting. These differences extend to aggregate output: the cumulative GDP multi-plier of green procurement is about 0.7 on impact and exceeds 1 within one and two years, whereas the brown multiplier remains statistically indistinguishable from zero over the first two years.

Keywords: Green public procurement; Energy transition; Fiscal multipliers
JEL codes E62; Q43; Q48;

Working paper no. 866

866 - The Macroeconomic Consequences of Green and Brown Government Spending

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Research Highlights

  • We construct a novel quarterly dataset of approximately 171,000 public procurement contracts across ten Eurozone economies (2011–2023), classifying spending as green or brown using detailed product-level procurement codes and identifying spending shocks from the institutional timing of contract award announcements.

  • We find that green procurement delivers substantially larger economic gains than brown procurement: the impact GDP multiplier is around 0.7 and exceeds 1 within one to two years, whereas the multiplier of brown procurement remains statistically indistinguishable from zero over the first two years. 

  • Green and brown procurement have near mirror-image effects on energy markets. Green procurement lowers energy prices, reduces energy-sector activity, and cuts oil import dependence by up to 4.6 percentage points, while brown procurement raises energy prices and reinforces reliance on fossil fuels. 

  • The economic benefits of green procurement are strongest during recessions and periods of elevated uncertainty, and green spending is associated with stronger innovation outcomes, while brown procurement significantly reduces both total and green patenting activity. 

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