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The effects of state aid on total factor productivity growth

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  • Patrick Van Cayseele
  • Joep Konings
  • Ilona Sergant

Abstract

This paper analyzes the relationship between state aid and ?rm performance in terms of productivity growth. To this end, we use all European state aid cases that were granted (either to an individual ?rm or a group of ?rms under the form of a scheme) in manufacturing between 2003 and 2011. Our ?ndings show that state aid measures are able to enhance productivity growth when ?rms are constraint due to a lack of cash availability. Since laggard ?rms are more likely to be ?nancially constraint, they experience more TFP growth than ?close-to-frontier??rms when receiving state aid. This bene?cial e¤ect of state aid is mainly driven by the post-crisis years in the sample. Our results are consistent with optimal development planning by pro?t maximizing ?rms.
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Suggested Citation

  • Patrick Van Cayseele & Joep Konings & Ilona Sergant, 2014. "The effects of state aid on total factor productivity growth," Working Papers of Department of Economics, Leuven 548612, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:548612
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    File URL: https://lirias.kuleuven.be/retrieve/19454c6c-36b3-4c13-9342-6452adc0fb15
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    1. is not listed on IDEAS
    2. repec:nbb:ecrart:y:2014:m:december:i:iii:p:69-82 is not listed on IDEAS
    3. Marjan Petreski, 2021. "Measuring economic effects of state aid granted to private enterprises in North Macedonia: The case of the governmental Plan for Economic Growth," Finance Think Policy Studies 2021-05/34, Finance Think - Economic Research and Policy Institute.
    4. Marjan Petreski, 2022. "State Aid Causing Distinct Incentives? Quasi-Experimental Measurement of the Effects of Grants on Private Enterprises in North Macedonia," Evaluation Review, , vol. 46(2), pages 200-230, April.
    5. Emmanuel Dhyne & Catherine Fuss, 2014. "Main lessons of the NBB’s 2014 conference “Total factor productivity : measurement, determinants and effects”," Economic Review, National Bank of Belgium, issue iii, pages 63-76, December.
    6. Fatih Cemil ÖZBUĞDAY & Erik BROUWER, 2016. "Measuring the Extent of European State Aid Control: An Econometric Analysis of the European Commission Decisions," Sosyoekonomi Journal, Sosyoekonomi Society, issue 24(30).

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