Some Causal Effects of an Industrial Policy

Chiara Criscuolo, Ralf Martin, Henry Overman and John van Reenen

American Economic Review, 2019, vol. 109, issue 1, 48-85

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 ten-percentage point increase in the maximum investment subsidy stimulates a 10% 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.

JEL-codes: E24 G31 H25 L25 L52 R23 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20160034
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Citations: View citations in EconPapers (168)

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Working Paper: Some causal effects of an industrial policy (2019)
Working Paper: Some Causal Effects of an Industrial Policy (2012)
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