IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/6788.html
   My bibliography  Save this paper

The Effects of Capital Subsidization on Israeli Industry

Author

Listed:
  • Arie Bregman
  • Melvyn Fuss
  • Haim Regev

Abstract

An industrial policy of subsidizing physical capital investment has been utilized in many countries in order to encourage export growth and spread economic development to outlying areas. For Israel, we possess a unique time series-cross section micro data set that details investment and its associated subsidies by vintage at the level of the individual enterprise for 620 firms. These data provide the means by which an empirical analysis of the effects of the policy of subsidizing capital can be undertaken. We estimate that, for the years 1990-94, this policy has resulted in production inefficiencies ranging from 5% for firms that receive the average level of subsidies to 15% for heavily subsidized firms. We also document the fact that much of the subsidization appears not to have been necessary, in the sense that subsidized firms generally have earned higher rates of return on their total physical capital (including that portion which was subsidized) than firms that were not subsidized.

Suggested Citation

  • Arie Bregman & Melvyn Fuss & Haim Regev, 1998. "The Effects of Capital Subsidization on Israeli Industry," NBER Working Papers 6788, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6788
    Note: PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w6788.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bregman, Arie & Fuss, Melvyn & Regev, Haim, 1995. "The production and cost structure of Israeli industry Evidence from individual firm data," Journal of Econometrics, Elsevier, vol. 65(1), pages 45-81, January.
    2. Bregman, Arie & Fuss, Melvyn & Regev, Haim, 1991. "High tech and productivity: Evidence from Israeli industrial firms," European Economic Review, Elsevier, vol. 35(6), pages 1199-1221, August.
    3. D Holden & J K Swales, 1993. "Factor Subsidies, Employment Generation, and Cost per Job: A Partial Equilibrium Approach," Environment and Planning A, , vol. 25(3), pages 317-338, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael Beenstock & Daniel Felsenstein, 2003. "Decomposing the Dynamics of Regional Earnings Disparities in Israel," ERSA conference papers ersa03p90, European Regional Science Association.
    2. Goolsbee, Austan, 2004. "Taxes and the quality of capital," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 519-543, March.
    3. Daniel Felsenstein, 2011. "Capital Deepening and Regional Inequality: An Empirical Analysis (refereed paper)," ERSA conference papers ersa10p759, European Regional Science Association.
    4. Roberto Gabriele & Marco Zamarian & Enrico Zaninotto, 2006. "Assessing the economic impact of public industrial policies: an empirical investigation on subsidies," ROCK Working Papers 039, Department of Computer and Management Sciences, University of Trento, Italy, revised 12 Jun 2008.
    5. Michael Beenstock & Daniel Felsenstein & Nadav Ben Zeev, 2011. "Capital deepening and regional inequality: an empirical analysis," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(3), pages 599-617, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arie Bregman & Melvyn Fuss & Haim Regev, 1998. "The Effects of Capital Subsidization on Israeli Industry," Working Papers fuss-98-01, University of Toronto, Department of Economics.
    2. Navon, Guy, 2009. "Human Capital Spillovers in the Workplace: Labor Diversity and Productivity," MPRA Paper 17741, University Library of Munich, Germany.
    3. Martin Biewen & Constantin Weiser, 2014. "An empirical test of marginal productivity theory," Applied Economics, Taylor & Francis Journals, vol. 46(9), pages 996-1020, March.
    4. Figus, Gioele & Swales, J.Kim & Turner, Karen, 2018. "Can Private Vehicle-augmenting Technical Progress Reduce Household and Total Fuel Use?," Ecological Economics, Elsevier, vol. 146(C), pages 136-147.
    5. Sheng, Margaret L. & Chien, Iting, 2016. "Rethinking organizational learning orientation on radical and incremental innovation in high-tech firms," Journal of Business Research, Elsevier, vol. 69(6), pages 2302-2308.
    6. Manuel Trajtenberg, 2002. "Government Support for Commercial R&D: Lessons from the Israeli Experience," NBER Chapters, in: Innovation Policy and the Economy, Volume 2, pages 79-134, National Bureau of Economic Research, Inc.
    7. Harrigan, Frank & McGregor, Peter G & Swales, J K, 1996. "The System-Wide Impact on the Recipient Region of a Regional Labour Subsidy," Oxford Economic Papers, Oxford University Press, vol. 48(1), pages 105-133, January.
    8. Biewen, Martin & Weiser, Constantin, 2011. "A New Approach to Testing Marginal Productivity Theory," IZA Discussion Papers 6113, Institute of Labor Economics (IZA).
    9. R. Rijesh, 2015. "Technology Import and Manufacturing Productivity in India: Firm Level Analysis," Journal of Industry, Competition and Trade, Springer, vol. 15(4), pages 411-434, December.
    10. Tetsuji Yamada & Tadashi Yamada & Gordon Liu, 1997. "Value-added productivity of manufacturing industries in Japan," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1317-1324.
    11. Daniel Felsenstein, 1994. "Large High-technology Firms and the Spatial Extension of Metropolitan Labour Markets: Some Evidence from Israel," Urban Studies, Urban Studies Journal Limited, vol. 31(6), pages 867-893, June.
    12. Hasan, Rana, 2002. "The impact of imported and domestic technologies on the productivity of firms: panel data evidence from Indian manufacturing firms," Journal of Development Economics, Elsevier, vol. 69(1), pages 23-49, October.
    13. Bregman, Arie & Fuss, Melvyn & Regev, Haim, 1995. "The production and cost structure of Israeli industry Evidence from individual firm data," Journal of Econometrics, Elsevier, vol. 65(1), pages 45-81, January.
    14. Rana Hasan, 2000. "The Impact of Imported and Domestic Technologies on Productivity: Evidence from Indian Manufacturing Firms," Economics Study Area Working Papers 06, East-West Center, Economics Study Area.
    15. Zvi Griliches & Haim Regev, 1992. "Productivity and Firm Turnover in Israeli Industry: 1979-1988," NBER Working Papers 4059, National Bureau of Economic Research, Inc.
    16. Ke Li & Jie Zhang & Yihua Yu & Zhibiao Liu, 2010. "Does Market‐Oriented Economic Transition Enhance Enterprise Productivity? Evidence From China'S Enterprises," Pacific Economic Review, Wiley Blackwell, vol. 15(5), pages 719-742, December.
    17. Liu, Jin-Tan & Tsou, Meng-Wen & Wang, Ping, 2008. "Differential cash constraints, financial leverage and the demand for money: Evidence from a complete panel of Taiwanese firms," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 523-542, March.
    18. Arie Bregman & Melvyn Fuss & Haim Regev, 1992. "The Production and Cost Structure of Israeli Industry: Evidence From Individual Firm Data," NBER Working Papers 4072, National Bureau of Economic Research, Inc.
    19. Sikhanwita Roy & Tuhin Das & Debesh Chakraborty, 2002. "A Study on the Indian Information Sector: An Experiment with Input-Output Techniques," Economic Systems Research, Taylor & Francis Journals, vol. 14(2), pages 107-129, June.
    20. Pawel Dobrzanski & Wojciech Grabowski, 2019. "Structural and productivity changes of Central and Eastern Europe," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 427-471.

    More about this item

    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6788. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.