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The impact of state aid on economic growth

Author

Listed:
  • Michael Polemis

    (University of Piraeus)

  • Thanasis Stengos

    (University of Guelph)

Abstract

We shed light on the nature of the relationship between state aid and economic growth for a panel of 28 EU countries over the period 2002-2017. We show that this relationship is statistically significant and negative. A 10% increase (decrease) in the state aid from the sample mean decreases (increases) annual real per capita growth by 1.6% on average suggesting that countries relying solely on state aid will perform worse.

Suggested Citation

  • Michael Polemis & Thanasis Stengos, 2020. "The impact of state aid on economic growth," Economics Bulletin, AccessEcon, vol. 40(2), pages 1083-1090.
    • Handle: RePEc:ebl:ecbull:eb-19-01045
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2020/Volume40/EB-20-V40-I2-P93.pdf
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    References listed on IDEAS

    as
    1. Eric Werker & Faisal Z. Ahmed & Charles Cohen, 2009. "How Is Foreign Aid Spent? Evidence from a Natural Experiment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 225-244, July.
    2. Michael A. Clemens & Steven Radelet & Rikhil R. Bhavnani & Samuel Bazzi, 2012. "Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth," Economic Journal, Royal Economic Society, vol. 122(561), pages 590-617, June.
    3. Andreas Savvides & Theofanis P. Mamuneas & Thanasis Stengos, 2006. "Economic development and the return to human capital: a smooth coefficient semiparametric approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 111-132.
    4. Chauvet, Lisa & Ehrhart, Hélène, 2018. "Aid and growth: evidence from firm-level data," Journal of Development Economics, Elsevier, vol. 135(C), pages 461-477.
    5. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    6. 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.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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