The public cost of economic policy uncertainty: Evidence from brazilian public procurements

• 939,684 federal procurement auctions in Brazil from 2014 to 2018 are analyzed. • I find that a 1 SD increase in EPU raises prices paid by 0.2% relative to estimated values. • Bidding behavior becomes more conservative in periods with heightened economic policy uncertainty, especially for high-value auctions. • One month of elevated EPU is estimated to cost the government approximately 6.3 million Brazilian reais. Using a comprehensive dataset of 939,684 procurement auctions from the Brazilian federal government between 2014 and 2018, I find that economic policy uncertainty (EPU) is significantly correlated with the cost-efficiency of public procurement. Specifically, a one-standard-deviation increase in EPU correlates with a 0.2% increase in the price paid by public administration compared to the estimated price of the goods being procured. Results are replicated using data from 2024 and 2025. Although the number of bidders stay the same, in high EPU periods bidders bid more conservatively, especially in high-value auctions. All considered, a single month with elevated EPU (1 SD above the mean) is estimated to cost the federal government approximately 6.3 million Brazilian reais.