Counterfactual Impact Evaluation of Enterprise Support Policies: An Empirical Application to EU Co-Sponsored, National and Regional Programs
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Date
2010-07
Journal Title
Journal ISSN
Volume Title
Publisher
John Glenn School of Public Affairs
Abstract
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.
Description
Keywords
enterprise support programs, counterfactual impact evaluation, investment grants, below market-rate Loans