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State Aid and Export Competitiveness in the EU

Author

Listed:
  • Mario Holzner

    () (The Vienna Institute for International Economic Studies, wiiw)

  • Roman Stöllinger

    () (The Vienna Institute for International Economic Studies, wiiw)

Abstract

Despite the proclaimed return of industrial policy (Wade, 2012) state aid provided by EU Member States remains at a historically low level. This is partly explained by the unique institutional arrangement in the EU which empowers the European Commission to monitor and restrict state aid activities of Member States. Making use of European state aid statistics over the period 1995-2011 we employ an augmented macroeconomic export function to investigate the relationship between state aid for the manufacturing sector and Member States’ export performance. With manufacturing value added exports serving as a proxy for export performance, our model suggests that a 10% increase in manufacturing aid increases exports by 0.67% for the average EU country. The result is confirmed by instrumental variable estimation. We also find that the impact of state aid on exports is increasing with government effectiveness leading to large differences in the leverage of aid expenditures to promote export performance across Member States.

Suggested Citation

  • Mario Holzner & Roman Stöllinger, 2013. "State Aid and Export Competitiveness in the EU," wiiw Working Papers 106, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:wpaper:106
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    References listed on IDEAS

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    Cited by:

    1. Çiğdem Börke Tunali & Jan Fidrmuc, 2015. "State Aid Policy in the European Union," Journal of Common Market Studies, Wiley Blackwell, vol. 53(5), pages 1143-1162, September.
    2. Michael Landesmann & Doris Hanzl-Weiss, 2016. "Correcting external imbalances in the European economy," Chapters,in: Boosting European Competitiveness, chapter 3, pages 14-36 Edward Elgar Publishing.
    3. Klaus S. Friesenbichler & Michael Peneder, 2016. "Innovation, Competition and Productivity. Firm Level Evidence for Eastern Europe and Central Asia," WIFO Working Papers 516, WIFO.

    More about this item

    Keywords

    industrial policy; state aid; value added exports; external competitiveness;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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