Assessing the Economic Impact of Public Industrial Policies: An Empirical Investigation on Subsidies
32 Pages Posted: 23 Jan 2008
Date Written: November 2006
Empirical literature ﬁndings do not provide a clear-cut interpretation of the effects of public aid on ﬁrms performances. We contribute to this literature analysing the eﬀects of public regional subsidies on investment using a new dataset covering all the ﬁrms in the Italian province of Trento, along with a record of public aid granted in the last 15 years. We ﬁnd permanent positive eﬀects of aid on ﬁrms' size, but no eﬀect is found on factor substitution, nor on technical change. Moreover, subsidies do not improve either proﬁtability or productivity. These results help better deﬁne the scope for local aid.
Keywords: Regional policy, public subsidies, propensity score matching
JEL Classification: R11, R58, C31
Suggested Citation: Suggested Citation