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Impact evaluation of EU subsidies for economic development on the Hungarian SME sector

Author

Listed:
  • Ádám Banai

    (Magyar Nemzeti Bank (Central Bank of Hungary))

  • Péter Lang

    (Magyar Nemzeti Bank (Central Bank of Hungary))

  • Gábor Nagy

    (Magyar Nemzeti Bank (Central Bank of Hungary))

  • Martin Stancsics

    (Magyar Nemzeti Bank (Central Bank of Hungary))

Abstract

Although EU funds play a pivotal role not only for Hungary but for the entire European Union as well, there is debate regarding their effectiveness in the literature. This paper investigates the impact of direct economic development subsidies extended in the context of the Cohesion Policy programmes as part of the 2007-2013 programming period of the European Union, on Hungarian micro, small and medium-sized enterprises. Based on a micro database, we assess the effects of the beneficiaries' first subsidies on various performance indicators, using a combination of propensity score matching and fixed effects panel regression. According to our results, economic development funds had a significant positive impact on the number of employees, sales revenue, gross value added and in some cases, operating profit. However, the labour productivity of beneficiaries was not significantly affected by any of the support schemes. Furthermore, by explicitly comparing non-refundable subsidies (grants) and refundable assistance (financial instruments) extended under the Structural Funds and the Cohesion Fund, we find that there is no significant difference in their effectiveness.

Suggested Citation

  • Ádám Banai & Péter Lang & Gábor Nagy & Martin Stancsics, 2017. "Impact evaluation of EU subsidies for economic development on the Hungarian SME sector," MNB Working Papers 2017/8, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:wpaper:2017/8
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    File URL: http://mnb.hu/letoltes/eufa-wp-final-1.pdf
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    Citations

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    Cited by:

    1. Ondřej Dvouletý & Stjepan Srhoj & Smaranda Pantea, 2021. "Public SME grants and firm performance in European Union: A systematic review of empirical evidence," Small Business Economics, Springer, vol. 57(1), pages 243-263, June.
    2. Gereben, Áron & Rop, Anton & Petriček, Matic & Winkler, Adalbert, 2019. "The impact of international financial institutions on small and medium enterprises: The case of EIB lending in Central and Eastern Europe," EIB Working Papers 2019/09, European Investment Bank (EIB).
    3. Amamou, Raschid & Gereben, Áron & Wolski, Marcin, 2020. "Making a difference: Assessing the impact of the EIB's funding to SMEs," EIB Working Papers 2020/04, European Investment Bank (EIB).
    4. Banai, Ádám & Lang, Péter & Nagy, Gábor & Stancsics, Martin, 2017. "A gazdaságfejlesztési célú EU-támogatások hatásvizsgálata a magyar kkv-szektorra [The effects of EU economic-development subsidies on micro, small and medium-sized firms in Hungary]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 997-1029.
    5. Špetlík Václav & Čadil Jan, 2023. "When Daces Bite Deeper than Sharks – Does the SMEs Public Subsidy Dose Matter?," Review of Economic Perspectives, Sciendo, vol. 23(4), pages 233-250, December.

    More about this item

    Keywords

    programme evaluation; EU subsidies; firm-level effects; propensity score matching; fixed effects.;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis

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