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Creating Jobs Through Public Subsidies: An Empirical Analysis

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Author Info
Sourafel Girma () (University of Nottingham)
Holger Görg () (University of Nottingham and IZA)
Eric Strobl () (Ecole Polytechnique Paris and IZA)
Frank Walsh () (University College Dublin)

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Abstract

This paper analyses the impact of government grants on labour demand using plant level data for manufacturing industry in Ireland. Our data consists of a large sample of plants and their complete grant history. We provide evidence that additional employment is created over and above the level that would have prevailed in the absence of grant payments. We also find differences in the employment response to subsidies between domestic and foreignowned plants, with the former creating more additional jobs per euro of grant payment. Simple cost-benefit analysis reveals that a large part of the costs of grants appears to be recouped in additional wage streams under reasonable assumptions.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3168.

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Length: 38 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:iza:izadps:dp3168

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Related research
Keywords: grants; labour demand; multinationals;

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Find related papers by JEL classification:
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July. [Downloadable!] (restricted)
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  2. Görg, Holger & Strobl, Eric, 2002. "Multinational Companies and Indigenous Development: An Empirical Analysis," CEPR Discussion Papers 3325, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Harrison, Ann E. & McMillan, Margaret S., 2003. "Does direct foreign investment affect domestic credit constraints?," Journal of International Economics, Elsevier, vol. 61(1), pages 73-100, October. [Downloadable!] (restricted)
  4. Nickell, S.J., 1987. "Dynamic models of labour demand," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 9, pages 473-522 Elsevier. [Downloadable!] (restricted)
  5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  6. Wren, Colin, 2003. "Informational Rents and Discretionary Industrial Assistance," Royal Economic Society Annual Conference 2003 222, Royal Economic Society. [Downloadable!]
  7. Holger G–rg & Eric Strobl, 2003. "Multinational Companies, Technology Spillovers and Plant Survival," Scandinavian Journal of Economics, Blackwell Publishing, vol. 105(4), pages 581-595, December. [Downloadable!] (restricted)
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  8. Holden, Darryl R & Swales, J K, 1995. "The Additionality, Displacement and Substitution Effects of Factor Subsidies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 42(2), pages 113-26, May.
  9. Malcomson, J., 1998. "Individual Employment Contracts," Discussion Paper Series In Economics And Econometrics 9804, Economics Division, School of Social Sciences, University of Southampton.
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  10. Helena Lenihan, 2004. "Evaluating Irish industrial policy in terms of deadweight and displacement: a quantitative methodological approach," Applied Economics, Taylor and Francis Journals, vol. 36(3), pages 229-252, February. [Downloadable!] (restricted)
  11. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group. [Downloadable!]
  12. Holger Görg & Eric Strobl, 2003. ""Footloose" Multinationals?," Manchester School, University of Manchester, vol. 71(1), pages 1-19, January. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Betcherman, Gordon & Daysal, N. Meltem & Pagés, Carmen, 2008. "Do Employment Subsidies Work? Evidence from Regionally Targeted Subsidies in Turkey," IZA Discussion Papers 3508, Institute for the Study of Labor (IZA). [Downloadable!]
  2. Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2008. "Public Support to Clusters: A Firm Level Study of French “Local Productive Systems”," CEPR Discussion Papers 7102, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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