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The Relation between State Aid and Economic Development in the European Union

Author

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  • Nicolae Băcilă

    () (Babes-Bolyai University, Cluj-Napoca, Romania)

Abstract

The main purpose of the paper is to provide a quantitative and qualitative analy-sis of state aid policy and its role in ensuring economic development in the EU. Based on theoretical approaches and empirical evidence, it is assumed that an effi-cient state aid policy should support the macroeconomic stabilization and the eco-nomic development. Therefore an econometric model is proposed to evaluate and quantify the relation between the level of horizontal aid and the value of GDP per capita at purchasing power parity standard. According to the results of the analysis, important disparities can be identified in analyzing the correlation between the two indicators mentioned above, deficitary to several EU member states, suggesting the necessity of a better coordination in the economic policies. Thus, one of the most relevant conclusions is that while the gen-eral objective of reducing state aid level is mainly achieved since the early 1990s, a redirection of state aid towards horizontal objectives can be observed beginning with 2000 and is still ongoing at present with important consequences for the general economic development of the EU member states.

Suggested Citation

  • Nicolae Băcilă, 2010. "The Relation between State Aid and Economic Development in the European Union," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 13(36), pages 111-122, June.
  • Handle: RePEc:rej:journl:v:13:y:2010:i:36:p:111-122
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    More about this item

    Keywords

    competition policy; state aid; horizontal aid; sectoral aid; economic growth and development;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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