DO GOVERNMENTAL SUBSIDIES INCREASE PRODUCTIVITY OF FIRMS? EVIDENCE FROM A PANEL OF SLOVENE FIRMS Cover Image

DO GOVERNMENTAL SUBSIDIES INCREASE PRODUCTIVITY OF FIRMS? EVIDENCE FROM A PANEL OF SLOVENE FIRMS
DO GOVERNMENTAL SUBSIDIES INCREASE PRODUCTIVITY OF FIRMS? EVIDENCE FROM A PANEL OF SLOVENE FIRMS

Author(s): Polona DOMADENIK, Matjaž Koman, Janez Prašnikar
Subject(s): Business Economy / Management, Economic history, Economic policy, Government/Political systems
Published by: Institut društvenih znanosti Ivo Pilar
Keywords: state aid; subsidies; industrial policy; competition;

Summary/Abstract: Our study focuses on examining the relationship between productivity (or productivity growth) and state aid allocation in Slovenia during the period of 1998 to 2012. The country itself represents almost an ideal case as the amount of subsidies being allocated in the relevant period decreased significantly after joining the EU. Our study builds on the theoretical model of Aghion et al. (2015) arguing that sectorial policy can enhance growth and efficiency if it is made competition-friendly. The main results show, that by increasing dispersion of subsidies within particular sectors by one standard deviation, the productivity growth increases by 0.03 percentage points on average, ceteris paribus. State aid has been especially important in the period of economic downturn (2009–2012). However we found evidence that firms receiving a higher portion of subsidies were less productive when compared with counterparts from the same sector receiving less or no subsidies. The difference was the biggest during the period of economic downturn.

  • Issue Year: 27/2018
  • Issue No: 2
  • Page Range: 199-220
  • Page Count: 22
  • Language: English
Toggle Accessibility Mode