Investment Crowding-Out: Firm-Level Evidence from Germany

Pavel Ciaian, d'Artis Kancs and Jerzy Michalek

LICOS Discussion Papers from LICOS - Centre for Institutions and Economic Performance, KU Leuven

Abstract: The main objective of the present paper is to estimate the extent to which firm investment is substituted (crowded-out) by investment support policies granted under the EU Rural Development Programme (RDP). In the empirical analyses we employ the difference-in-difference propensity score matching approach, which allows us to address several important sources of bias, such as selection bias, the simultaneity bias, and functional form misspecification, from which many previous studies suffer. Using panel data of 1,333 firms from the Schleswig-Holstein region in Germany, we find that the crowding-out effect of the RDP is close to 100%, implying that firms use public support to substitute for private investments. Furthermore, no evidence was found that, due to RDP programme support, firms would have brought forward their investments planned originally in a later period, rejecting the f inter-temporal substitution of investments.

Keywords: Investment subsidy; crowding-out; substitution effect; additionality; subsidy leverage; propensity score matching. (search for similar items in EconPapers)
JEL-codes: F1 O1 R3 R4 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://feb.kuleuven.be/drc/licos/publications/dp/DP%20370%20complete.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://feb.kuleuven.be/drc/licos/publications/dp/DP%20370%20complete.pdf [301 Moved permanently]--> https://feb.kuleuven.be/drc/licos/publications/dp/DP%20370%20complete.pdf)

Related works:
Working Paper: Investment crowding-out: firm-level evidence from Germany (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lic:licosd:37015

Access Statistics for this paper

More papers in LICOS Discussion Papers from LICOS - Centre for Institutions and Economic Performance, KU Leuven Contact information at EDIRC.
Bibliographic data for series maintained by ().