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State aid modernization and its implications for the assessment of large investment projects: The relevance of market screens in the regional aid guidelines

Author

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  • Hans W. Friederiszick

    (ESMT European School of Management and Technology)

  • Nicola Tosini

    (E.CA Economics)

Abstract

The Regional Aid Guidelines foresee specific screens for an in-depth assessment of Large Investment Projects (LIPs): an in-depth assessment is initiated if the market share of the aid beneficiary is above 25% or the investment results in a capacity expansion above 5% in a declining market. It is currently being discussed within the broader State Aid Modernization package and also due to a recent court ruling on the case Propapier whether these market screens should stay as they are. Based on a dataset of all LIP cases notified under the 2006 Regional Aid Guidelines, we evaluate those market screens and find that the screens do have power to identify problematic cases – cases with a below average expected aid effectiveness and aid measures targeting specific industries. We also find, however, that the market screens are affected by a severe implementation problem and, hence, do not help to shorten phase I investigations. From a conceptual perspective, they are also not capable of identifying some of the potentially most problematic regional State aid cases. Policy options are discussed.

Suggested Citation

  • Hans W. Friederiszick & Nicola Tosini, 2012. "State aid modernization and its implications for the assessment of large investment projects: The relevance of market screens in the regional aid guidelines," ESMT Research Working Papers ESMT-12-05, ESMT European School of Management and Technology.
  • Handle: RePEc:esm:wpaper:esmt-12-05
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    File URL: http://static.esmt.org/publications/workingpapers/ESMT-12-05.pdf
    File Function: First version, 2012
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    More about this item

    Keywords

    competition policy; regional state aid; subsidies; anti-competitive effects;

    JEL classification:

    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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