State Aid to Business in the European Union: a Focus on the Car Sector

Marcella Nicolini, Carlo Scarpa and Paola Valbonesi

No 1, DEM Working Papers Series from University of Pavia, Department of Economics and Management

Abstract: Making use of an original dataset we empirically investigate the determinants of state aid to the car industry in the European Union. The EU regulatory system on state aids and the long history of governments' grants to this industry make this an interesting case study. Our findings show that in the period 1992-2008 -controlling for a number of variables - subsidies to the car sector have shown a decreasing trend, mainly because of the reduction in the aid aimed at increasing the productive capacity of firms. We find a pattern of a dynamic strategic game among EU countries, whereby aiding a firm induces other member states to grant more subsidies; this seems to be mainly driven by rescue and resctruring aid. Overall, economic and political variables (industry's value added, country's income per capita, election year, government's political orientation) are found to significantly affect aid to the car industry.

Keywords: car industry; state aid to business; EU competition policy (search for similar items in EconPapers)
JEL-codes: H25 H50 L52 L62 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-09
New Economics Papers: this item is included in nep-bec and nep-eur
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pav:demwpp:demwp0001

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