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The Association between Subsidies and Productivity: Panel Analysis

Author

Listed:
  • Cüneyt KOYUNCU

    (Bilecik Þeyh Edebali University, Faculty of Economics and Administrative Sciences, Department of Economics, Bilecik, Turkey.)

  • Yüksel OKÞAK

    (Bilecik Þeyh Edebali University, Pazaryeri Vocational School, Bilecik, Turkey.)

Abstract

This study investigates the impact of subsidies, which is a proxy for incentives given to firms in an economy, on value added created by entire economy and four different sectors (i.e., agriculture, manufacturing, industry, and services). The largest period under study is between 1972 and 2013 and the largest sample covers 151 countries. First of all univariate and multivariate fixed time effect models (FEM) and the following univariate and multivariate random time effect models (REM) were estimated using unbalanced panel data. Value added and its logarithmic values are used in the model as a dependent variable. Five different value added variables are used in order to evaluate the sensitivity and validity of our empirical results. This study empirically investigates the effect of subsidy on value added level of a country. In order to test this relationship the study use five different indicators for value added. The data used in analyses are unbalanced data and cover the years between 1972 and 2013 for 151 countries in the largest sense. The main finding of the study implies that countries with higher subsidy level experience higher level of value added.

Suggested Citation

  • Cüneyt KOYUNCU & Yüksel OKÞAK, 2017. "The Association between Subsidies and Productivity: Panel Analysis," Journal of Economics Library, KSP Journals, vol. 4(1), pages 76-82, March.
    • Handle: RePEc:ksp:journ5:v:4:y:2017:i:1:p:76-82
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    References listed on IDEAS

    as
    1. Dennis, Allen, 2016. "Household welfare implications of fossil fuel subsidy reforms in developing countries," Energy Policy, Elsevier, vol. 96(C), pages 597-606.
    2. Bronzini, Raffaello & Piselli, Paolo, 2016. "The impact of R&D subsidies on firm innovation," Research Policy, Elsevier, vol. 45(2), pages 442-457.
    3. Bernini, Cristina & Pellegrini, Guido, 2011. "How are growth and productivity in private firms affected by public subsidy? Evidence from a regional policy," Regional Science and Urban Economics, Elsevier, vol. 41(3), pages 253-265, May.
    4. Al Iriani, Mahmoud A. & Trabelsi, Mohamed, 2016. "The economic impact of phasing out energy consumption subsidies in GCC countries," Journal of Economics and Business, Elsevier, vol. 87(C), pages 35-49.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Subsidies; Value Added; Incentives.;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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