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Industrial policy evaluation in the presence of spillovers

Augusto Cerqua () and Guido Pellegrini ()

Small Business Economics, 2017, vol. 49, issue 3, 671-686

Abstract: Abstract The shortage of studies on spatial spillovers of capital subsidy policies is rather surprising, considering that such policies are usually designed to generate spatial externalities. We propose a new framework that allows positive agglomeration effects to be contrasted with the negative cross-sectional substitution and the crowding-out effect. The global evaluation of the ATT and the spillover parameters shifts the spotlight from the policy effect on subsidised firms to the global effect of capital subsidy policies on the targeted territory. The empirical evaluation of a policy in Italy mainly directed towards small- and medium-sized firms shows that the impact on investments, turnover and employment is positive and large, but is negative on TFP. However, the employment growth is partially determined to the detriment of the untreated firms.

Keywords: Spillovers; Policy evaluation; Small- and medium-sized firms; Public subsidies (search for similar items in EconPapers)
JEL-codes: C14 H25 L52 O25 (search for similar items in EconPapers)
Date: 2017
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