Creating Jobs Through Public Subsidies: An Empirical Analysis

38 Pages Posted: 6 Dec 2007

See all articles by Sourafel Girma

Sourafel Girma

Nottingham University Business School

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Eric Strobl

Ecole Polytechnique, Paris - Department of Economic Sciences; IZA Institute of Labor Economics

Frank Walsh

National University of Ireland - University College Dublin

Date Written: November 2007

Abstract

This paper analyses the impact of government grants on labour demand using plant level data for manufacturing industry in Ireland. Our data consists of a large sample of plants and their complete grant history. We provide evidence that additional employment is created over and above the level that would have prevailed in the absence of grant payments. We also find differences in the employment response to subsidies between domestic and foreign-owned plants, with the former creating more additional jobs per euro of grant payment. Simple cost-benefit analysis reveals that a large part of the costs of grants appears to be recouped in additional wage streams under reasonable assumptions.

Keywords: grants, labour demand, multinationals

JEL Classification: H25, J23

Suggested Citation

Girma, Sourafel and Gorg, Holger and Strobl, Eric and Walsh, Frank, Creating Jobs Through Public Subsidies: An Empirical Analysis (November 2007). IZA Discussion Paper No. 3168. Available at SSRN: https://ssrn.com/abstract=1038342

Sourafel Girma

Nottingham University Business School ( email )

Jubilee Campus
Nottingham, NG8 1BB
United Kingdom
+44 0 115 8466656 (Phone)

HOME PAGE: http://www.nottingham.ac.uk/~lizsmg/

Holger Gorg

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Eric Strobl (Contact Author)

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Frank Walsh

National University of Ireland - University College Dublin ( email )

Department of Economics
Belfield
Dublin 4
Ireland
353-1-7068697 (Phone)
353-1-2830068 (Fax)

HOME PAGE: http://www.ucd.ie/~economic/staff/fwalsh/

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