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Public subsidies, TFP and efficiency: A tale of complex relationships

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  • Bernini, Cristina
  • Cerqua, Augusto
  • Pellegrini, Guido

Abstract

This paper evaluates the impact of subsidies on the different components of TFP for granted firms’ long-term growth. The impact of capital subsidies is captured by a quasi–experimental method (Multiple RDD), exploiting the conditions for a local random experiment created by an Italian industrial policy. Results show that capital subsidies negatively affect TFP growth in the short term, and signals of positive effects appear only after 3–4 years. This positive medium-long term impact comes especially through technological change and not through scale impact change, as may have been expected.

Suggested Citation

  • Bernini, Cristina & Cerqua, Augusto & Pellegrini, Guido, 2017. "Public subsidies, TFP and efficiency: A tale of complex relationships," Research Policy, Elsevier, vol. 46(4), pages 751-767.
    • Handle: RePEc:eee:respol:v:46:y:2017:i:4:p:751-767
    DOI: 10.1016/j.respol.2017.02.001
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    More about this item

    Keywords

    Policy evaluation; Public subsidies; TFP decomposition; Stochastic frontier model; Regression discontinuity design;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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