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Firm participation in financial incentive programmes: The case of subsidies for outward internationalisation

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  • Bannò, Mariasole
  • Sgobbi, Francesca

Abstract

This study explores the process of firms' participation in financial subsidies supporting outward foreign direct investments. Policy makers should be concerned about the existence of self-selection mechanisms among eligible firms as they could fail to reach the target population. Using firm-level data on subsidised firms and potential applicants, we show that firms self-select according to the balance between application costs and expected benefits. These findings have interesting policy implications. First, participation rate among the target group could be enhanced by lowering application costs. Second, in order to avoid deadweight effects, expected benefits should carry a higher value for target firms.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 32 (2010)
Issue (Month): 6 (November)
Pages: 792-803

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Handle: RePEc:eee:jpolmo:v:32:y::i:6:p:792-803

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Web page: http://www.elsevier.com/locate/inca/505735

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Keywords: Policy evaluation Firm participation process Outward FDI;

References

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  1. Xulia Gonz�lez & Jordi Jaumandreu & Consuelo Pazo, 2005. "Barriers to Innovation and Subsidy Effectiveness," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 930-949, Winter.
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  7. Helena Lenihan, 2004. "Evaluating Irish industrial policy in terms of deadweight and displacement: a quantitative methodological approach," Applied Economics, Taylor & Francis Journals, vol. 36(3), pages 229-252.
  8. Robert J Rolfe & David A Ricks & Martha M Pointer & Mark McCarthy, 1993. "Determinants of FDI Incentive Preferences of MNEs," Journal of International Business Studies, Palgrave Macmillan, vol. 24(2), pages 335-355, June.
  9. Giebe, Thomas & Grebe, Tim & Wolfstetter, Elmar, 2006. "How to allocate R&D (and other) subsidies: An experimentally tested policy recommendation," Research Policy, Elsevier, vol. 35(9), pages 1261-1272, November.
  10. James J. Heckman & Jeffrey A. Smith, 2003. "The Determinants of Participation in a Social Program: Evidence from a Prototypical Job Training Program," NBER Working Papers 9818, National Bureau of Economic Research, Inc.
  11. Katsushi Imai, 2004. "Targeting versus Universalism: An Evaluation of Indirect Effects of the Employment Guarantee Scheme in India," Royal Holloway, University of London: Discussion Papers in Economics 04/07, Department of Economics, Royal Holloway University of London, revised Jun 2004.
  12. Richard Blundell & Monica Costa Dias, 2000. "Evaluation methods for non-experimental data," Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 427-468, January.
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  14. van Tongeren, F. W., 1998. "Microsimulation of Corporate Response to Investment Subsidies," Journal of Policy Modeling, Elsevier, vol. 20(1), pages 55-75, February.
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