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Evaluating the impact of public subsidies on a firm's performance: A quasi-experimental approach

Author

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  • Néstor Duch

    (Grup en Federalisme Fiscal i Economia Regional(Institut de Recerca en Economia - IEB), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona)

  • Daniel Montolio

    (Grup en Federalisme Fiscal i Economia Regional(Institut de Recerca en Economia - IEB), Departament d'Economia Política i Hisenda Pública, Universitat de Barcelona)

  • Mauro Mediavilla

    (Grup en Federalisme Fiscal i Economia Regional(Institut de Recerca en Economia - IEB), Departament d'Economia Política i Hisenda Pública, Universitat de Barcelona)

Abstract

Many regional governments in developed countries design programs to improve the competitiveness of local firms. In this paper, we evaluate the effectiveness of public programs whose aim is to enhance the performance of firms located in Catalonia (Spain). We compare the performance of publicly subsidised companies (treated) with that of similar, but unsubsidised companies (non-treated). We use the Propensity Score Matching (PSM) methodology to construct a control group which, with respect to its observable characteristics, is as similar as possible to the treated group, and that allows us to identify firms which retain the same propensity to receive public subsidies. Once a valid comparison group has been established, we compare the respective performance of each firm. As a result, we find that recipient firms, on average, change their business practices, improve their performance, and increase their value added as a direct result of public subsidy programs.

Suggested Citation

  • Néstor Duch & Daniel Montolio & Mauro Mediavilla, 2007. "Evaluating the impact of public subsidies on a firm's performance: A quasi-experimental approach," Working Papers XREAP2007-07, Xarxa de Referència en Economia Aplicada (XREAP), revised Jul 2007.
    • Handle: RePEc:xrp:wpaper:xreap2007-07
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    7. Gosk Beata & Nehrebecka Natalia, 2019. "Are subsidies for Polish enterprises effective: empirical results based on panel data," Central European Economic Journal, Sciendo, vol. 6(53), pages 108-131, January.
    8. Alessandra Amendola & Marinella Boccia & Gianluca Mele & Luca Sensini, 2020. "Fiscal Policies and Performance: Evidence from Dominican Republic firms," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(5), pages 1-16.
    9. Matas, Anna & Raymond, José-Luis & Roig, José-Luis, 2009. "Car ownership and access to jobs in Spain," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(6), pages 607-617, July.
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    More about this item

    Keywords

    Public policy; evaluation studies; firm performance; propensity Score Matching.;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

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