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Some causal effects of an industrial policy
File | Description | Size | Format | |
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![]() | Accepted version | 742.32 kB | Microsoft Word | View/Open |
![]() | Accepted version | 11.28 MB | Microsoft Word | View/Open |
Title: | Some causal effects of an industrial policy |
Authors: | Criscuolo, C Martin, R Overman, H Van Reenen, J |
Item Type: | Journal Article |
Abstract: | Business support policies designed to raise employment and productivity are ubiquitous around the world. We exploit changes in the area-specific eligibility criteria for a major program to support manufacturing jobs through investment subsidies (Regional Selective Assistance). European state aid rules determine whether a sub-national geographical area is eligible for these subsidies, and we construct instrumental variables for area (and plant) eligibility based on the estimated parameters of these rule changes. We find areas eligible for higher subsidies significantly increase manufacturing jobs and reduce unemployment. An exogenous ten-percentage point increase in an area’s maximum investment subsidy stimulates about a 9% increase in manufacturing employment. The treatment effect exists solely for small firms – large companies appear to “game” the system, accepting subsidies without increasing activity. There are positive effects on investment and employment for incumbent firms but no effect on Total Factor Productivity. |
Issue Date: | 1-Jan-2019 |
Date of Acceptance: | 13-Jun-2018 |
URI: | http://hdl.handle.net/10044/1/61327 |
DOI: | https://doi.org/10.1257/aer.20160034 |
ISSN: | 0002-8282 |
Publisher: | American Economic Association |
Start Page: | 48 |
End Page: | 85 |
Journal / Book Title: | American Economic Review |
Volume: | 109 |
Issue: | 1 |
Copyright Statement: | © 2019 American Economic Association. All rights reserved. |
Keywords: | Social Sciences Economics Business & Economics RESEARCH-AND-DEVELOPMENT REGRESSION DISCONTINUITY DESIGN LOCAL ECONOMIC-DEVELOPMENT DEVELOPMENT SUBSIDIES REGIONAL GRANTS LEVEL EVIDENCE INVESTMENT GROWTH TAX INNOVATION Economics 14 Economics 15 Commerce, Management, Tourism and Services |
Publication Status: | Published |
Online Publication Date: | 2019-01-01 |
Appears in Collections: | Imperial College Business School Centre for Environmental Policy Faculty of Natural Sciences |