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Investment Grants and Firms' Productivity: How Effective Is a Grant Booster Shot?

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  • Alexandre, Fernando

    (University of Minho)

  • Chaves, Miguel

    (University of Minho)

  • Portela, Miguel

    (University of Minho)

Abstract

This paper investigates the effect of awarding a second investment grant to the same firm. We implement a Regression Discontinuity Design strategy using a very rich firm-level administrative database, which allows us to link applications to grants and their scores to firms' performance. Overall, our results show a positive and significant impact of an investment grant booster shot on firms' labour productivity. This effect is significantly larger than the effect of a single grant. A more granular analysis shows a strong impact of awarding a second grant to small-sized firms. However, we found no effect on micro, medium and large-sized firms. Our results suggest that the characteristics of the targeted firms, namely firm size, matter for the effectiveness of awarding a second grant to the same firm.

Suggested Citation

  • Alexandre, Fernando & Chaves, Miguel & Portela, Miguel, 2022. "Investment Grants and Firms' Productivity: How Effective Is a Grant Booster Shot?," IZA Discussion Papers 15779, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15779
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    Cited by:

    1. Maria Manuel Campos & Sónia Cabral, 2023. "European structural funds and the performance of Portuguese firms," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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    More about this item

    Keywords

    industrial policy; investment grants; multiple treatments; productivity;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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