Some Causal Effects of an Industrial Policy

2019/01/01 by Chiara Criscuolo, Ralf Martin, Henry G. Overman +1 · 1 voice · 4 citations
Economics, Econometrics and Finance · Social Sciences · #Business #Construct (python library) #Econometrics #Economics #Exploit #Finance #Firm Innovation and Growth #Innovation Policy and R&D #Instrumental variable #Investment (military) #Labour economics #Macroeconomics #Market economy #Percentage point #Point (geometry) #Productivity #Regional Development and Policy #Subsidy #Total factor productivity #Unemployment

paper · pdf · doi:10.1257/aer.20160034

openalex publication_date 2019/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05

Abstract

We exploit changes in the area-specific eligibility criteria for a program to support jobs through investment subsidies. European rules determine whether an area is eligible for subsidies, and we construct instrumental variables for area eligibility based on parameters of these rule changes. Areas eligible for higher subsidies significantly increased jobs and reduced unemployment. A 10-percentage point increase in the maximum investment subsidy stimulates a 10 percent increase in manufacturing employment. This effect exists solely for small firms: large companies accept subsidies without increasing activity. There are positive effects on investment and employment for incumbent firms but not Total Factor Productivity. (JEL E24, G31, H25, L25, L52, R23)

Citations

• Identification and Estimation of Local Average Treatment Effects
• The Effect of R&D Subsidies on Private R&D
• The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade
• Do R&D Subsidies Stimulate or Displace Private R&D? Evidence from Israel

Cited by

• Place-based policies and geographical inequalities
• The Effects of Foreign Multinationals on Workers and Firms in the United States
• Picking winners? Government subsidies and firm productivity in China
• The effects of EU-funded enterprise grants on firms and workers

Discussions

• https://doi.org/10.1257/aer.20160034 [bsky, 0 points, 1 comments]

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