Business Subsidies and Employment of Firms: Overall Evaluation and Regional Extension
AbstractThis paper investigates the effects of business subsidies on the employment of firms in Finland, and explores possible regional differences in the effects. Employment of some 26,000 firms is followed annually between 1995-1998. We find that labour subsidies increase the firms' own employment payroll on average by 11 per cent. The marginal effect of subsidies however, is about 34 per cent. As firms pay, on average, 60 per cent of the employment payroll of a worker in a subsidised job, our results suggest that labour subsidies displace the firms' own employment expenditures. Moreover, the regional analysis indicates that the displacement effect has been milder in the Helsinki region than elsewhere, contributing to the divergence of regional economies. As an exception to the rule however, in some peripheral areas displacement has also been low. Finally, we do not find displacement or stimulation effects in the application of (i) Investment and Operation subsidies or (ii) R&D subsidies.
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Bibliographic InfoPaper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 268.
Date of creation: 11 Mar 2002
Date of revision:
Find related papers by JEL classification:
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
- M20 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - General
- J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
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