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Making Subsidies Work: Rules vs. Discretion

Federico Cingano, Paolo Pinotti (), Enrico Rettore and Filippo Palomba ()
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Paolo Pinotti: Paolo Pinotti
Filippo Palomba: Filippo Palomba

No 2207, RF Berlin - CReAM Discussion Paper Series from Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM)

Abstract: We estimate the employment effects of a large program of public investment subsidies that ranked applications on a score reflecting both objective criteria and local politicians’ preferences. Leveraging the rationing of funds as an ideal RDD, we characterize the heterogeneity of treatment effects and cost-per-new-job across inframarginal firms, and we estimate the cost effectiveness of subsidies under factual and counterfactual allocations. Firms ranking high on objective criteria and firms preferred by local politicians generated larger employment growth on average, but the latter did so at a higher cost-per-job. We estimate that relying only on objective criteria would reduce the cost-per-job by 11%, while relying only on political discretion would increase such cost by 47%.

Keywords: Public subsidies; investment; employment; political discretion; regression discontinuity (search for similar items in EconPapers)
JEL-codes: H25 J08 (search for similar items in EconPapers)
Date: 2022-03
New Economics Papers: this item is included in nep-ban, nep-eur and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Working Paper: Making Subsidies Work: Rules vs. Discretion (2022) Downloads
Working Paper: Making subsidies work: rules vs. discretion (2022) Downloads
Working Paper: Making Subsidies Work: Rules vs. Discretion (2022) Downloads
Working Paper: Making Subsidies Work: Rules vs. Discretion (2022) Downloads
Working Paper: Making Subsidies Work: Rules vs. Discretion (2022) Downloads
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