State Aid to Business in the European Union: A Focus on the Car Sector

University of Pavia Department of Economics and Management Working Paper No. 1

31 Pages Posted: 9 Sep 2012

See all articles by Marcella Nicolini

Marcella Nicolini

University of Pavia - Department of Economics and Management

Carlo Scarpa

University of Brescia; NERA Economic Consulting

Paola Valbonesi

University of Padua - Department of Economics and Management, DSEA

Date Written: September 1, 2012

Abstract

Making use of an original dataset we empirically investigate the determinants of state aid to the car industry in the European Union. The EU regulatory system on state aids and the long history of governments’ grants to this industry make this an interesting case study. Our findings show that in the period 1992-2008 - controlling for a number of variables - subsidies to the car sector have shown a decreasing trend, mainly because of the reduction in the aid aimed at increasing the productive capacity of firms. We find a pattern of a dynamic strategic game among EU countries, whereby aiding a firm induces other member states to grant more subsidies; this seems to be mainly driven by rescue and restructuring aid. Overall, economic and political variables (industry’s value added, country’s income per capita, election year, government’s political orientation) are found to significantly affect aid to the car industry.

Keywords: car industry, state aid to business, EU competition policy

JEL Classification: L52, L62, H25, H50

Suggested Citation

Nicolini, Marcella and Scarpa, Carlo and Valbonesi, Paola, State Aid to Business in the European Union: A Focus on the Car Sector (September 1, 2012). University of Pavia Department of Economics and Management Working Paper No. 1 . Available at SSRN: https://ssrn.com/abstract=2143458 or http://dx.doi.org/10.2139/ssrn.2143458

Marcella Nicolini

University of Pavia - Department of Economics and Management ( email )

Strada Nuova, 65
Pavia, 27100
Italy

Carlo Scarpa

University of Brescia ( email )

Via San Faustino 74B
Dipartimento di Scienze Economiche
25122 Brescia
Italy
+39+030+2988+833 (Phone)
+39+030+2988+839/840 (Fax)

NERA Economic Consulting ( email )

50 Main Street, 14th Floor
White Plains, NY 10606
United States

Paola Valbonesi (Contact Author)

University of Padua - Department of Economics and Management, DSEA ( email )

via Del Santo 33
Padova, 35123
Italy
+39+049+8274058 (Phone)

HOME PAGE: http://www.decon.unipd.it

Register to save articles to
your library

Register

Paper statistics

Downloads
44
Abstract Views
409
PlumX Metrics