Evaluating the Impact of Public Subsidies on a Firms Performance: a Quasi-experimental Approach
AbstractMany regional governments in developed countries design programs to improve the competitiveness of local firms. In this paper, we evaluate the effectiveness of public programs whose aim is to enhance the performance of firms located in Catalonia (Spain). We compare the performance of publicly subsidised companies (treated) with that of similar, but unsubsidised companies (non-treated). We use the Propensity Score Matching (PSM) methodology to construct a control group which, with respect to its observable characteristics, is as similar as possible to the treated group, and that allows us to identify firms which retain the same propensity to receive public subsidies. Once a valid comparison group has been established, we compare the respective performance of each firm. As a result, we find that recipient firms, on average, change their business practices, improve their performance, and increase their value added as a direct result of public subsidy programs.
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Bibliographic InfoPaper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 181.
Length: 30 pages
Date of creation: 2007
Date of revision:
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Postal: Espai de Recerca en Economia, Facultat de CiÃ¨ncies EconÃ²miques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.
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Other versions of this item:
- Néstor Duch & Daniel Montolio & Mauro Mediavilla, 2007. "Evaluating the impact of public subsidies on a firm's performance: A quasi-experimental approach," Working Papers XREAP2007-07, Xarxa de Referència en Economia Aplicada (XREAP), revised Jul 2007.
- Néstor Duch & Daniel Montolio & Mauro Mediavilla, 2007. "Evaluating the impact of public subsidies on a firm's performance: A quasi-experimental approach," Working Papers 2007/3, Institut d'Economia de Barcelona (IEB).
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-13 (All new papers)
- NEP-EFF-2007-07-13 (Efficiency & Productivity)
- NEP-PBE-2007-07-13 (Public Economics)
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