Capital Subsidies and the Performance of Firms
Abstract: In many countries, governments grant different capital subsidies to the business sector in order to promote growth. Also the EU, provides this type of subsidies. As De Long and Summers (1991) suggest there might be market failure justifications for public subsidisation of firms. However, because the use of subsidise is not unproblematic, it is far from clear how they affect long-run economic growth. This study examines the effects on total factor productivity of public capital subsidies to firms in Sweden between 1987 and 1993. Panel data which distinguish between subsidised and non-subsidised firms in the manufacturing industry are used. The results suggest that subsidisation can influence growth, but there seems to be little evidence that the subsidies have affected productivity.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 285.
Length: 19 pages
Date of creation: 23 Nov 1998
Date of revision:
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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Industrial policy; regional policy; capital subsidies; total factor productivity (TFP);
Find related papers by JEL classification:
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
- L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
- O20 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - General
- R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-11-30 (All new papers)
- NEP-EFF-1998-11-30 (Efficiency & Productivity)
- NEP-PUB-1998-11-30 (Public Finance)
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