Winners and Losers in Industrial Policy 2.0: An evaluation of the impacts of the Tunisian Industrial Upgrading Program

Large scale business subsidies tied to national industrial development promotion pro-grams are notoriously difficult to study and inseparable from the political economy aspect of large government programs. The Tunisian Industrial Upgrading Program, initiated in the late 80’s, to improve the competitiveness of Tunisian firms increasingly exposed to international competition through firm subsidies, is such an example. The continuation and resurgence of industrial devlopment programs, such as the Tunisian IUP, makes the rigorous evaluation of this type of program within the political economy framework, increasingly important. We use the Tunisian national firm registry database and a perceptions’ survey administered by the national research institute to measure the impact of the IUP and its beneficiaries. Using inverse propensity score re-weighted differences-in-differences regressions, we find that when program recipients are large firms, gains of the program are mostly retained by capital-owners, while when subsidies are distributed to small-sized firms, more gains go to labor.