Anatomy of Public Aid to Companies

Aïmane Abdelsalam (aimane.abdelsalam@univ-lille.fr) and Anne-Laure Delatte (anne-laure.delatte@dauphine.psl.eu)
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Aïmane Abdelsalam: CLERSÉ - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - CNRS - Centre National de la Recherche Scientifique
Anne-Laure Delatte: CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research

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Abstract: Despite the EU's competition policy, direct public aid to companies has increased considerably over the last few decades in France. We hand-collect original data from the French Parliament's annual budget reports since 1979, and reconstruct the total volume of tax breaks (and social contribution exemptions) granted to companies and households, to which we add public spending on subsidies and transfers. We can see that public aid to businesses rose from 2.74% to 7.11% of GDP between 1979 and 2019 (7.68% in 2022), while aid to households remained at around 5% of GDP. Most public aid to businesses is aimed at supporting competitiveness, employment and innovation. We ask three questions: how are they financed? Which companies benefit? Is this policy compatible with the objectives of reducing carbon emissions? Firstly, we use a simple accounting decomposition to show that state aid to companies has been associated with a reduction in other public spending, an increase in household taxation and a slowdown in the reduction of the public deficit. Secondly, we decompose our data by sector and merge them with sectoral administrative data broken down by company size, R&D intensity and sector market concentration. Thirdly, we calculate carbon and greenhouse gas emissions per euro of public aid, and show that half of public aid goes to pollution-intensive sectors.

Keywords: Tax breaks; tax credit; public policy; government budget; carbon emission (search for similar items in EconPapers)
Date: 2023-11-09
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Published in Seminar of Europe Department, International Monetary Fund (IMF), Nov 2023, Washington, United States

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04299088

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