DRAFT: DO NOT CITE OR CIRCULATE

Governments often use their considerable purchasing power to promote policy objectives. However, it remains unclear whether or when public procurement preferences can stimulate private markets for innovative products and services. We examine municipal government procurement policies that mandate the construction of “green ” buildings. We ask whether these policies aimed at government buildings actually influence private-sector building practices; specifically, the adoption of the U.S. Green Building Council's LEED standard. Using a combination of matching methods, panel-data and instrumental variables we find that municipal green building policies not only stimulate the supply of professionals investing in the required expertise, but also have spillover effects that spur private sector demand for green buildings. These findings suggest a link between product compatibility and environmental sustainability; specifically, new environmental standards may suffer from “excess inertia ” if adoption requires coordinated investments, for example between builders and real estate professionals. Government procurement policies are one way to break these deadlocks