Financial subsidies and bank lending: substitutes or complements? Micro level evidence from Italy
AbstractWe exploit Italian Central Credit Register data to investigate the effectiveness of subsidized credit programs for public financing to firms via the banking system. The effect of public incentives depends on the availability of financial resources for the beneficiary firms. Financially constrained firms are likely to use the subsidies to expand output, while less constrained firms will, at least partly, use the funds to replace more costly resources. Focusing on the relationship between bank credit and subsidized loans, we find that larger firms substitute public financing for bank lending, while there is not such evidence for smaller firms. The estimated degree of substitution is substantial, ranging from an estimated 70 per cent to 84 per cent.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 803.
Date of creation: Apr 2011
Date of revision:
financial subsidies; credit constraints; banking;
Find related papers by JEL classification:
- G2 - Financial Economics - - Financial Institutions and Services
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-24 (All new papers)
- NEP-BAN-2011-05-24 (Banking)
- NEP-CFN-2011-05-24 (Corporate Finance)
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