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Some causal effects of an industrial policy

Criscuolo, Chiara, Martin, Ralf, Overman, Henry G. and Van Reenen, John (2019) Some causal effects of an industrial policy. American Economic Review, 109 (1). pp. 48-85. ISSN 0002-8282

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Identification Number: 10.1257/aer.20160034

Abstract

We exploit changes in the area-specific eligibility criteria for a program to support jobs through investment subsidies. European rules determine whether an area is eligible for subsidies, and we construct instrumental variables for area eligibility based on parameters of these rule changes. Areas eligible for higher subsidies significantly increased jobs and reduced unemployment. A 10-percentage point increase in the maximum investment subsidy stimulates a 10 percent increase in manufacturing employment. This effect exists solely for small firms: large companies accept subsidies without increasing activity. There are positive effects on investment and employment for incumbent firms but not Total Factor Productivity.

Item Type: Article
Official URL: https://www.aeaweb.org/journals/aer
Additional Information: © 2018 American Economic Association
Divisions: Geography & Environment
Centre for Economic Performance
Economics
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HC Economic History and Conditions
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting; Fixed Investment and Inventory Studies
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales
L - Industrial Organization > L5 - Regulation and Industrial Policy > L52 - Industrial Policy; Sectoral Planning Methods
R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R23 - Regional Migration; Regional Labor Markets; Population
Sets: Departments > Geography and Environment
Date Deposited: 29 Jun 2018 09:45
Last Modified: 22 Sep 2019 23:07
URI: http://eprints.lse.ac.uk/id/eprint/88837

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