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State Aid Modernization and Its Implications for the Assessment of Large Investment Projects: The Relevance of Market Screens in the Regional Aid Guidelines

28 Pages Posted: 18 Oct 2012  

Hans Wolfgang Friederiszick

E.CA Economics; ESMT European School of Management and Technology

Nicola Tosini

affiliation not provided to SSRN

Date Written: October 18, 2012

Abstract

The Regional Aid Guidelines foresee specific screens for an in-depth assessment of Large Investment Projects (LIPs): an in-depth assessment is initiated if the market share of the aid beneficiary is above 25% or the investment results in a capacity expansion above 5% in a declining market. It is currently being discussed within the broader State Aid Modernization package and also due to a recent court ruling on the case Propapier whether these market screens should stay as they are. Based on a dataset of all LIP cases notified under the 2006 Regional Aid Guidelines, we evaluate those market screens and find that the screens do have power to identify problematic cases – cases with a below average expected aid effectiveness and aid measures targeting specific industries. We also find, however, that the market screens are affected by a severe implementation problem and, hence, do not help to shorten phase I investigations. From a conceptual perspective, they are also not capable of identifying some of the potentially most problematic regional State aid cases. Policy options are discussed.

Keywords: competition policy, regional state aid, subsidies, anti-competitive effects

JEL Classification: H81, L4, O25, R58

Suggested Citation

Friederiszick, Hans Wolfgang and Tosini, Nicola, State Aid Modernization and Its Implications for the Assessment of Large Investment Projects: The Relevance of Market Screens in the Regional Aid Guidelines (October 18, 2012). ESMT Working Paper No. 12-05. Available at SSRN: https://ssrn.com/abstract=2163552 or http://dx.doi.org/10.2139/ssrn.2163552

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HOME PAGE: http://www.esmt.org/hans-w-friederiszick

Nicola Tosini

affiliation not provided to SSRN

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