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State Aid to Business in the European Union: a Focus on the Car Sector

Author

Listed:
  • Marcella Nicolini

    () (Department of Economics and Management, University of Pavia)

  • Carlo Scarpa

    () (Department of Economics, University of Brescia)

  • Paola Valbonesi

    () (Department of Economics, University of Padova)

Abstract

Making use of an original dataset we empirically investigate the determinants of state aid to the car industry in the European Union. The EU regulatory system on state aids and the long history of governments' grants to this industry make this an interesting case study. Our findings show that in the period 1992-2008 -controlling for a number of variables - subsidies to the car sector have shown a decreasing trend, mainly because of the reduction in the aid aimed at increasing the productive capacity of firms. We find a pattern of a dynamic strategic game among EU countries, whereby aiding a firm induces other member states to grant more subsidies; this seems to be mainly driven by rescue and resctruring aid. Overall, economic and political variables (industry's value added, country's income per capita, election year, government's political orientation) are found to significantly affect aid to the car industry.

Suggested Citation

  • Marcella Nicolini & Carlo Scarpa & Paola Valbonesi, 2012. "State Aid to Business in the European Union: a Focus on the Car Sector," DEM Working Papers Series 001, University of Pavia, Department of Economics and Management.
  • Handle: RePEc:pav:demwpp:demwp0001
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    File URL: http://economia.unipv.it/docs/dipeco/quad/ps/RePEc/pav/demwpp/DEMWP0001.pdf
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    Cited by:

    1. Marcella Nicolini & Carlo Scarpa & Paola Valbonesi, 2013. "Aiding Car Producers in the EU: Money in Search of a Strategy," Journal of Industry, Competition and Trade, Springer, vol. 13(1), pages 67-87, March.

    More about this item

    Keywords

    car industry; state aid to business; EU competition policy;

    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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