The impact of state aid for restructuring on the allocation of resources
AbstractThe success of an economy depends largely on how successful it is in allocating inputs and outputs across businesses efficiently with minimum disruption and frictions. Market institutions that impact this allocation potentially account for productivity differences across countries. Existing studies use quite broad measures of institutions, mostly at the country level. This paper is the first to use census micro level data on a market institution with a potentially very distortive effect – state aid for the rescue and restructuring of firms in difficulty. I investigate the impact of this aid on static and dynamic efficiency of Slovenian manufacturing by combining the aid data with firm-level accounting data, using treatment effects estimators that assume selection on observables (linear regression models) and estimators that explicitly allow for selection on unobservables (instrumental variables models). The identification strategy in the latter models involves using variables that affect the chances of getting aid before 2002, but not after. The empirical analysis reveals that state aid hindered the efficient static allocation of resources, as measured by the Olley and Pakes (1996)-inspired micro covariance measure. None of the firms that received aid exited, aid had a positive impact on the growth rate of market shares, but did not have a significant impact on the growth of total factor productivity (TFP). These results suggest that aid was distortive.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 127.
Length: 41 pages
Date of creation: May 2011
Date of revision:
Contact details of provider:
Postal: One Exchange Square, London EC2A 2JN
Web page: http://www.ebrd.com/pages/research/publications/workingpapers.shtml
More information through EDIRC
Find related papers by JEL classification:
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- P2 - Economic Systems - - Socialist Systems and Transition Economies
- P5 - Economic Systems - - Comparative Economic Systems
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eslava, Marcela & Haltiwanger, John & Kugler, Adriana & Kugler, Maurice, 2004.
"The effects of structural reforms on productivity and profitability enhancing reallocation: evidence from Colombia,"
Journal of Development Economics, Elsevier,
Elsevier, vol. 75(2), pages 333-371, December.
- Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2004. "The Effects of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia," Working Papers 134, Barcelona Graduate School of Economics.
- Eslava, Marcela & Haltiwanger Jr, John C & Kugler, Adriana D. & Kugler, Maurice, 2004. "The Effects of Structural Reforms on Productivity- and Profitability-Enhancing Reallocation: Evidence from Colombia," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4569, C.E.P.R. Discussion Papers.
- Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2004. "The effects of structural reforms on productivity and profitability enhancing reallocation: Evidence from Colombia," Economics Working Papers 763, Department of Economics and Business, Universitat Pompeu Fabra.
- Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2004. "The Effect of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia," NBER Working Papers 10367, National Bureau of Economic Research, Inc.
- Eslava, Marcela & Haltiwanger, John & Kugler, Adriana & Kugler, Maurice, 2004. "The effects of structural reforms on productivity and profitabality enhancing reallocation: evidence from Colombia," Discussion Paper Series In Economics And Econometrics 0408, Economics Division, School of Social Sciences, University of Southampton.
- Domenico J. Marchetti & Francesco Nucci, 2001. "Labor effort over the business cycle," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 424, Bank of Italy, Economic Research and International Relations Area.
- Mojmir Mrak, 2004. "Mrak, M., Rojec, M., Silva-JÃ¡uregui, C. (eds.): Slovenia: From Yugoslavia to the European Union," Transition Studies Review, Springer, Springer, vol. 11(3), pages 269-272, December.
- De Loecker, Jan & Konings, Jozef, 2006. "Job reallocation and productivity growth in a post-socialist economy: Evidence from Slovenian manufacturing," European Journal of Political Economy, Elsevier, vol. 22(2), pages 388-408, June.
- Mojmir Mrak & Matija Rojec & Carlos Silva-JÃ¡uregui, 2004. "Slovenia : From Yugoslavia to the European Union," World Bank Publications, The World Bank, number 15032, August.
- Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E., 1998.
"The Dynamics of Industrial Competition,"
Cambridge Books, Cambridge University Press,
Cambridge University Press, number 9780521633574.
- Richard Disney & Jonathan Haskel & Ylva Heden, 2003.
"Restructuring and productivity growth in uk manufacturing,"
Economic Journal, Royal Economic Society,
Royal Economic Society, vol. 113(489), pages 666-694, 07.
- Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000. "Restructuring And Productivity Growth In UK Manufacturing," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2463, C.E.P.R. Discussion Papers.
- Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Entry, Exit and Establishment Survival in UK Manufacturing," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 51(1), pages 91-112, 03.
- Kolesnikova, Irina, 2010. "State Aid for Industrial Enterprises in Belarus: Remedy or Poison?," MPRA Paper 22403, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Olga Lucas).
If references are entirely missing, you can add them using this form.