Evaluating Irish industrial policy in terms of deadweight and displacement: a quantitative methodological approach

Helena Lenihan

Applied Economics, 2004, vol. 36, issue 3, 229-252

Abstract: Evaluation should consider what would have happened in the absence of assistance. To produce an assessment of this counter-factual scenario involves considering the twin concepts of deadweight and displacement. An evaluative framework is developed for measuring the impact of grant assistance to individual firms. Logit regression analysis is used to estimate predictive models for deadweight and displacement. The data were gathered during face-to-face interviews with the managing directors of firms that received grants from Shannon Development in the Shannon region of Ireland (self-assessment approach). The objective was to establish whether certain characteristics of grant-assisted firms can predict probable deadweight and displacement effects. In the case of deadweight, it was found that grant type, size of firm, whether investment appraisal carried out by firm included grant received and whether firm was a first-time or repeat grant recipient all impact on the level of deadweight. Regarding displacement, it was found that size of firm and type of ownership impact on displacement. While the evaluative framework has been 'tested' in an Irish regional context, the logic of the approach is clear and has a much wider international applicability regarding the evaluation of industrial policy interventions.

Date: 2004
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DOI: 10.1080/0003684042000175343

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