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Estimating the Impact of Capital Subsidies under Repeated Applications

Author

Listed:
  • Yuki HASHIMOTO
  • Toshikatsu INOUE
  • Fumiyuki SAKASHITA
  • Kazuhiko SUMIYA

Abstract

This study estimates the effect of a repeatedly implemented capital subsidy program. When firms can reapply, estimates that ignore repeated applications may conflate the impact of the initial subsidy with subsequent ones. To isolate the effect of the initial subsidy, we adapt the framework of Cellini, Ferreira and Rothstein (2010) to a difference-in-differences setting. Using firm-level panel data merged with administrative records on Japan’s largest SME subsidy program, we find that not accounting for future subsidies overestimates the effects of the initial subsidy on sales and employment.

Suggested Citation

  • Yuki HASHIMOTO & Toshikatsu INOUE & Fumiyuki SAKASHITA & Kazuhiko SUMIYA, 2025. "Estimating the Impact of Capital Subsidies under Repeated Applications," Discussion papers 25115, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:25115
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    References listed on IDEAS

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    1. Ashesh Rambachan & Jonathan Roth, 2023. "A More Credible Approach to Parallel Trends," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(5), pages 2555-2591.
    2. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, December.
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