Do Business Subsidies Facilitate Employment Growth?

Heli Koski and Mika Pajarinen

No 1235, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: We use data from 15508 Finnish companies with 10 or more employees for the years 2003-2008 to explore the relationship between employment growth and three endogenously determined business subsidy types (i.e. employment subsidy, R&D subsidy and other business subsidies). We find a positive contemporary relationship between all business subsidy types and employment growth. Our findings suggest that R&D subsidies further contribute to the firms employment for one year after and employment and other subsidies for three years after the reception of subsidies. After that, the differences between the subsidized and non-subsidized firms vanish. We further find, in line with the empirical studies of Harrison et al. (2008) and Hall et al. (2008), that both product innovation and sales growth from a firms old products contribute to the firms employment growth. Process innovation, instead, does not seem to have any significant effect on employment.

Keywords: public subsidies; technology policy; employment growth; Finland (search for similar items in EconPapers)
JEL-codes: J23 L10 O33 O38 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2011
New Economics Papers: this item is included in nep-ino, nep-sbm and nep-tid
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Do Business Subsidies Facilitate Employment Growth? (2012)
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