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State Aid for Industrial Enterprises in Belarus: Remedy or Poison?

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  • Kolesnikova, Irina
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    Abstract

    In this paper the impact of various types of state aid on aggregate productivity growth in Belarusian manufacturing is investigated by combining the data on government support with firm-level accounting data for period 1998-2007. Obtained results indicate that the state aid provided for restructuring truly leads to the modernization of the enterprises (capital-to-labor ratio grows), that this modernization leads to an increase in effectiveness (TFP grows, especially at large enterprises), and that this growth of TFP allows the newly restructured enterprises to raise their market share which results in the growth of the allocative efficiency. However, when the state aid is provided to support enterprises in financial distress, while it leads to an increase in employment (only for enterprises receiving aid, especially for large enterprises, but not for the total sample) and to an expansion in the market share of large enterprises (not small and medium size), this achievement comes at the expense of the decrease in TFP.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22403.

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    Date of creation: Jan 2010
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    Handle: RePEc:pra:mprapa:22403

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    Related research

    Keywords: State aid; total factor productivity; allocative efficiency; Arellano-Bond method.;

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