Business Subsidies and Employment of Firms: Overall Evaluation and Regional Extension

Takis Venetoklis () and Aki Kangasharju ()

No 268, Discussion Papers from VATT Institute for Economic Research

Abstract: This paper investigates the effects of business subsidies on the employment of firms in Finland, and explores possible regional differences in the effects. Employment of some 26,000 firms is followed annually between 1995-1998. We find that labour subsidies increase the firms' own employment payroll on average by 11 per cent. The marginal effect of subsidies however, is about 34 per cent. As firms pay, on average, 60 per cent of the employment payroll of a worker in a subsidised job, our results suggest that labour subsidies displace the firms' own employment expenditures. Moreover, the regional analysis indicates that the displacement effect has been milder in the Helsinki region than elsewhere, contributing to the divergence of regional economies. As an exception to the rule however, in some peripheral areas displacement has also been low. Finally, we do not find displacement or stimulation effects in the application of (i) Investment and Operation subsidies or (ii) R&D subsidies.

Keywords: Evaluation, Employment, Business subsidies, Regions, Labour market, Työmarkkinat, Regional development, Aluekehitys, Effectiveness of public services, Julkisten palvelujen vaikuttavuus, H200 - Taxation, Subsidies, and Revenue: General, J400 - Particular Labor Markets: General, M200 - Business Economics: General, R230 - Urban, Rural, and Regional Economics: Regional Migration; Regional Labor Markets; Population, (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.doria.fi/handle/10024/148216

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fer:dpaper:268

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Discussion Papers from VATT Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Anita Niskanen ().