Public Procurement and the Private Supply of Green Buildings

We measure the impact of municipal policies requiring governments to construct green buildings on private-sector adoption of the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) standard. Using matching methods, panel data, and instrumental variables, we find that government procurement rules produce spillover effects that stimulate both private-sector adoption of the LEED standard and supplier investments in green building expertise. Our findings suggest that government procurement policies can accelerate the diffusion of new environmental standards that require coordinated complementary investments by various types of private adopter.