Granting more bang for the buck: The heterogeneous effects of firm subsidies

Federico Cingano, Filippo Palomba, Paolo Pinotti and Enrico Rettore

Labour Economics, 2023, vol. 83, issue C

Abstract: We estimate the effects of a large program of public investment subsidies targeting Italian firms of different size and age. Investment projects were ranked by numerical scores of project quality and funded until exhaustion of funds. Exploiting this allocation mechanism as an ideal regression discontinuity design, we estimate that subsidies increased investment of marginal firms near the cutoff by 39 percent, and employment by 17 percent over a 6-year period. Smaller firms exhibit higher employment growth upon receiving the subsidy, but larger firms generate more jobs at a lower cost, and younger firms do better than older firms.

Keywords: Public subsidies; Investment; Employment; Firm size (search for similar items in EconPapers)
JEL-codes: H25 J08 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:83:y:2023:i:c:s0927537123000787

DOI: 10.1016/j.labeco.2023.102403

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