Enterprises are the primary employers and the key to stable employment. Government procurement is a fiscal policy tool that connects public demand and market supply. Exploring the impact and mechanism of government procurement on the actual employment of enterprises not only helps to expand the relevant literature on government procurement and enterprise employment at the academic research level, but also provides policy references for achieving the current goal of “stabilizing employment” in China at the practical level.

This paper studies the impact of government procurement on the scale of enterprise employment and its mechanism by matching national government procurement contracts with the parent and subsidiary data of listed companies from 2015 to 2021, using the government order contract information disclosed on the Chinese government procurement website. The results show that government procurement has a significant impact on the scale of enterprise employment, with heterogeneous government procurement having an even greater effect. Mechanism testing reveals that stabilizing enterprise production and operation, as well as alleviating enterprise financing constraints, are the main mechanisms by which government procurement enhances the scale of enterprise employment. Heterogeneity analysis indicates that during periods of high macroeconomic uncertainty or high unemployment rates, enterprises with a high degree of labor dependence and regions with good financial status experience a more pronounced effect of government procurement on “stabilizing employment”. Compared to government employment subsidies and tax incentives, government procurement has a more prominent effect on “stabilizing employment”. However, the synergistic mechanism between different policy tools needs to be strengthened.

The innovations of this paper are mainly reflected in the following aspects: First, it aims to confirm that government procurement promotes enterprise employment, expanding the research on the microeconomic consequences of government procurement. Second, it aims to deepen the research on the influencing factors of enterprise employment at the micro level, providing a deeper understanding of the micro-mechanism of demand-side fiscal policy tools that affect enterprise employment. Third, it provides valuable policy recommendations and practical solutions for addressing the current challenges of maintaining and creating employment opportunities in China, while also enhancing the effectiveness of the government procurement system. In addition, this paper compares the effects of government employment subsidies, tax incentives, and government procurement as representative fiscal policy tools to support enterprise employment, providing a reference for the comprehensive and effective use of various policy tools.