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Evaluating the impact of public subsidies on a firm's performance: A quasi-experimental approach

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  • Néstor Duch

    ()
    (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

  • Daniel Montolio

    ()
    (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

  • Mauro Mediavilla

    ()
    (Universitat de Barcelona (UB))

Abstract

Many regional governments in developed countries design programs to improve the competitiveness of local firms. In this paper, we evaluate the effectiveness of public programs whose aim is to enhance the performance of firms located in Catalonia (Spain). We compare the performance of publicly subsidised companies (treated) with that of similar, but unsubsidised companies (non-treated). We use the Propensity Score Matching (PSM) methodology to construct a control group which, with respect to its observable characteristics, is as similar as possible to the treated group, and that allows us to identify firms which retain the same propensity to receive public subsidies. Once a valid comparison group has been established, we compare the respective performance of each firm. As a result, we find that recipient firms, on average, change their business practices, improve their performance, and increase their value added as a direct result of public subsidy programs.

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Bibliographic Info

Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2007/3.

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Length: 34 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:ieb:wpaper:2007/11/doc2007-3

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Keywords: Evaluation studies; Firm performance; Propensity Score Matching; Public policy;

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References

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  1. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, StataCorp LP, vol. 2(4), pages 358-377, November.
  2. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity score matching methods for non-experimental causal studies," Discussion Papers, Columbia University, Department of Economics 0102-14, Columbia University, Department of Economics.
  3. Helena Lenihan, 2004. "Evaluating Irish industrial policy in terms of deadweight and displacement: a quantitative methodological approach," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(3), pages 229-252.
  4. Arvanitis, Spyros & Hollenstein, Heinz & Lenz, Stephan, 2002. " The Effectiveness of Government Promotion of Advanced Manufacturing Technologies (AMT): An Economic Analysis Based on Swiss Micro Data," Small Business Economics, Springer, Springer, vol. 19(4), pages 321-40, December.
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  6. Xulia Gonz�lez & Jordi Jaumandreu & Consuelo Pazo, 2005. "Barriers to Innovation and Subsidy Effectiveness," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 930-949, Winter.
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  10. Lerner, Josh, 1999. "The Government as Venture Capitalist: The Long-Run Impact of the SBIR Program," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 72(3), pages 285-318, July.
  11. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, American Economic Association, vol. 76(4), pages 604-20, September.
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  13. Jeffrey Smith & Petra Todd, 2003. "Does Matching Overcome Lalonde's Critique of Nonexperimental Estimators?," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers, University of Western Ontario, CIBC Centre for Human Capital and Productivity 20035, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  14. Czarnitzki, Dirk & Fier, Andreas, 2002. "Do Innovation Subsidies Crowd Out Private Investment? Evidence from the German Service Sector," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 02-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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Citations

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Cited by:
  1. Matas, Anna & Raymond, José-Luis & Roig, José-Luis, 2009. "Car ownership and access to jobs in Spain," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 43(6), pages 607-617, July.
  2. Antonio Manresa & Ferran Sancho, 2012. "Leontief versus Ghosh: two faces of the same coin," Working Papers, Xarxa de Referència en Economia Aplicada (XREAP) XREAP2012-18, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2012.
  3. Anna Castañer & Mª Mercè Claramunt, 2014. "Optimal stop-loss reinsurance: a dependence analysis," Working Papers, Xarxa de Referència en Economia Aplicada (XREAP) XREAP2014-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Apr 2014.
  4. Néstor Duch-Brown & José García-Quevedo & Daniel Montolio, 2008. "Assessing the assignation of public subsidies: Do the experts choose the most efficient R&D projects?," Working Papers, Institut d'Economia de Barcelona (IEB) 2008/5, Institut d'Economia de Barcelona (IEB).
  5. Anna Matas Prats & José Luís Raymond Bara & José Luís Raymond Bara, 2008. "Job accessibility and employment probability," Working Papers, Xarxa de Referència en Economia Aplicada (XREAP) XREAP2008-05, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2008.
  6. Christian Durán Weitkamp & Mónica Martín Bofarull & Federico Pablo Martí, 2008. "Economic effects of road accessibility in the Pyrenees: user perspective," Working Papers, Xarxa de Referència en Economia Aplicada (XREAP) XREAP2008-01, Xarxa de Referència en Economia Aplicada (XREAP), revised Jan 2008.

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