Counterfactual Impact Evaluation of Enterprise Support Policies: An Empirical Application to EU Co-Sponsored, National and Regional Programs
Keywords:enterprise support programs
counterfactual impact evaluation
below market-rate Loans
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Publisher:John Glenn School of Public Affairs
Series/Report no.:John Glenn School of Public Affairs. Working Paper Series. July 2010
While the importance of enterprise support policies in the EU continues to grow, there remains only limited empirical evidence examining the effects of the policies on socially relevant outcomes such as employment. This paper shows how to exploit firm-level data, formed by merging longitudinal employment and firm demographic information with the firm-level archives of the incentive payments, to offer robust counterfactual impact evaluation evidence on the employment effects of the coexisting European Regional Development Fund (ERDF) co-sponsored, national and regional programs commonly operated in many EU regions. The analysis uses data from a large northern Italian region and yields employment impacts of the policies under plausible identification assumptions, disentangling the impacts of different values of both the economic intensities of the program assistance and different forms of assistance (the latter distinguishing between capital grants and below-market interest rate/revolving loans). The paper finds that the absolute per-firm employment effects of the programs are increasingly larger the higher the economic value of the incentives awarded to the assisted firms. The incentives with the highest per-firm economic value, however, yield employment impacts with a much higher cost per each additional new job than incentives with a lower economic value. The results of the analysis also show that the absolute per-firm employment effects of soft loans are similar to those of capital grants. However, taking into consideration that soft loans bear a much lower cost in terms of public money devoted to the subsidies than capital grants, the impact estimates retrieved from analysis indicates that soft loans possess an higher employment effectiveness than capital grants.