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State aid modernization and its implications for the assessment of large investment projects: The relevance of market screens in the regional aid guidelines

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Author Info

  • Hans W. Friederiszick

    (ESMT European School of Management and Technology)

  • Nicola Tosini

    (E.CA Economics)

Abstract

The Regional Aid Guidelines foresee specific screens for an in-depth assessment of Large Investment Projects (LIPs): an in-depth assessment is initiated if the market share of the aid beneficiary is above 25% or the investment results in a capacity expansion above 5% in a declining market. It is currently being discussed within the broader State Aid Modernization package and also due to a recent court ruling on the case Propapier whether these market screens should stay as they are. Based on a dataset of all LIP cases notified under the 2006 Regional Aid Guidelines, we evaluate those market screens and find that the screens do have power to identify problematic cases – cases with a below average expected aid effectiveness and aid measures targeting specific industries. We also find, however, that the market screens are affected by a severe implementation problem and, hence, do not help to shorten phase I investigations. From a conceptual perspective, they are also not capable of identifying some of the potentially most problematic regional State aid cases. Policy options are discussed.

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File URL: http://static.esmt.org/publications/workingpapers/ESMT-12-05.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by ESMT European School of Management and Technology in its series ESMT Research Working Papers with number ESMT-12-05.

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Length: 25 pages
Date of creation: 18 Oct 2012
Date of revision:
Handle: RePEc:esm:wpaper:esmt-12-05

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Keywords: competition policy; regional state aid; subsidies; anti-competitive effects;

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