Public policy for the agro-food industry and economic performances: evidences from Piedmont, Italy

The European Union has a common rural development policy, motivated by the fact that more than 90% of the entire European territory can be classified as rural and 56% of European citizens live in rural areas. Each Member State sets out a Rural Development Programme (RDP) focused on three main axes: economic development, environment protection and quality of life. Within the first axis, several measures are finalized to stimulate the investments for diversifying the agricultural activities; increasing the competitiveness of the businesses; improving the production and transformation processes and the commercialization towards a more sustainable direction. The measure 123 "Adding value to agricultural and forestry products" is one of the most important in terms of public resources spent. It aims at increasing the competitiveness of the agro-food industry and the value of products and it supports the investments in technological and organizational innovations in the transformation process. The policy is managed at regional level and every Italian Region is responsible for allocating the founds, selecting the enterprises that would benefit from the economic support and evaluating the impact of its financing. This paper presents the results of a research carried out to measure the impact of the 123 RDP measure in the Piedmont region, in Italy. The economic performances (ROI, ROE, ROA) of two different groups of firms ? beneficiaries and non-beneficiaries of the public support ? from the entire population of industrial agro-food enterprises of Piedmont, during the period 2005-2012, were compared. Despite the economic crises affected negatively all the firms analyzed in that period, those that benefited from the public funds showed better growth rates and profitability indexes. The authors propose different explanations for the results. From one hand, the RPD funds can be really determinant in sustaining the investments and improving the competitiveness of the firms involved in the programme. From the other hand, the beneficiaries are already the best performing firms of the territory and for this reason they are more competitive in the process of applying for the subsidy and selection of the beneficiaries, with a "picking the winners" effect. From a methodological point of view, the research demonstrates that the measurement of the economic performance indexes in a counterfactual analysis between a group of firms beneficiaries of public funds and a control group of firms that did not benefited from the aid is an efficient method to evaluate the impact of development policy in a systematic way.