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Exploring the Effects of Government Policies on Economic Performance: Evidence Using Panel Data for Korean Renewable Energy Technology Firms

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  • Bongsuk Sung

    (Department of International Trade, Kyonggi University, 154–42, Gwanggyosan-ro, Yeongtong-gu, Suwon-si, Gyeonggi-do 16227, Korea)

  • Myoung Shik Choi

    (Department of Economics, Kyonggi University, 154–42, Gwanggyosan-ro, Yeongtong-gu, Suwon-si, Gyeonggi-do 16227, Korea)

  • Woo-Yong Song

    (Department of Management and Accounting, Habat National University, 125, Dongseodae-ro, Yuseong-gu, Daejeon 34518, Korea)

Abstract

Previous studies have investigated how government policies on renewable energy technology (RET) affect economic performance at the industrial level. However, each firm in the RET industry is heterogeneous in terms of their capacities, resources, and the amount of public subsidies they receive. Considering the context in which public subsidies are provided to firms, this study econometrically investigates the effects of government policies on firms’ financial performance using panel data from the Korean RET industry. We consider the results of various panel framework tests; establish a panel vector autoregressive model in first differences; and test the dynamic relationships between firms’ financial performance, government subsidies (R&D- and non-R&D-related), firm size and age, and organizational slack, using a bias-corrected least squares dummy variable estimator. We find that R&D- and non-R&D-related subsidies positively affect firms’ financial performance in the long run. In the short run, there are bidirectional positive causal relationships between firms’ financial performance and organizational slack (and non-R&D-related subsidy), and firm size and non-R&D-related subsidy. A positive short-run relationship runs from R&D-related subsidy to firms’ financial performance, from firm age to non-R&D-related subsidy, and from firm size to firm age. Further, there are dynamic effects in all estimations, demonstrating that the dependent variables of the previous period enhance their values in the current period. The results provide some policy and strategic implications.

Suggested Citation

  • Bongsuk Sung & Myoung Shik Choi & Woo-Yong Song, 2019. "Exploring the Effects of Government Policies on Economic Performance: Evidence Using Panel Data for Korean Renewable Energy Technology Firms," Sustainability, MDPI, vol. 11(8), pages 1-19, April.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:8:p:2253-:d:222820
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