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Impact of Deadweight Effect on the Performance of Supported Firms

Author

Listed:
  • Simona Bratkova

    (University of Economics in Bratislava)

  • Miroslav Sipikal

    (University of Economics in Bratislava)

  • Valeria Nemethova

    (University of Economics in Bratislava)

Abstract

Public support can flow to different areas of the economy and can have several dimensions. Frequent recipients of subsidies are firms, whose support can have specific effects. Such an undesirable effect occurs if these projects are supported that would be carried out without this subsidy. In this case, we are talking about the so-called deadweight effect, which has been discussed and investigated in several studies in the scientific literature. The present article tries to shift knowledge about this effect through a study of supported companies in Slovakia. The aim of the research is to find out whether deadweight effect had an impact on the short-term or long-term results of investigated companies by analysing economic results of the supported firms. Changes in several firm indicators were monitored as profit, sales and value added for individual years (2010, 2013, 2018). Results present changes in size categories of firms according to the number of employees. Firm groups were distinguished based on the extent of deadweight effect. The results showed that in cases when deadweight effect occurred, the profitability of supported firms increased, which ultimately means inessentiality of subsidy that spilled over into the profits of surveyed companies.

Suggested Citation

  • Simona Bratkova & Miroslav Sipikal & Valeria Nemethova, 2021. "Impact of Deadweight Effect on the Performance of Supported Firms," RAIS Conference Proceedings 2021 0014, Research Association for Interdisciplinary Studies.
    • Handle: RePEc:smo:lpaper:0014
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    References listed on IDEAS

    as
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    2. Maurice Basle, 2006. "Strengths and weaknesses of European Union policy evaluation methods: Ex-post evaluation of objective 2, 1994-99," Regional Studies, Taylor & Francis Journals, vol. 40(2), pages 225-235.
    3. David Bartle & Michele Morris, 2010. "Evaluating the impacts of government business assistance programmes: approaches to testing additionality," Research Evaluation, Oxford University Press, vol. 19(4), pages 275-280, October.
    4. Colin Wren, 2005. "Regional grants: are they worth it?," Fiscal Studies, Institute for Fiscal Studies, vol. 26(2), pages 245-275, June.
    5. Picard, Pierre M., 2001. "Job additionality and deadweight spending in perfectly competitive industries: the case for optimal employment subsidies," Journal of Public Economics, Elsevier, vol. 79(3), pages 521-541, March.
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