Event summary

Authors:

Miguel Chaves, Miguel Portela and Fernando Alexandre

Abstract:

This paper addresses the impact of investment subsidies to firms by European Regional Development Funds. We use a very rich firm-level administrative and audited database for the Portuguese economy to implement an effective identification strategy to estimate causal effects. We investigate several dimensions of policy design in the allocation of investment subsidies to firms. Our analysis focus on the effectiveness of giving single versus multiple investment subsidies to firms. Our estimates show that giving booster shots of investment subsidies to groups of firms may be more effective on firms’ performance, namely on productivity. Small-sized firms benefit the most from booster shots, while micro-sized firms do not show substantial benefits from receiving multiple investment subsidies. Our results also show that the effectiveness of booster shots of investment subsidies depends on the type and combination of policy instruments. Finally, our estimates also show that a concentration of multiple investment subsidies over a shorter time span produces a stronger impact on firms’ performance.

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