Capital Subsidies and the Performance of Firms

Capital Subsidies and the Performance of Firms In many countries, governments grant different capital subsidies to the business sector in order to promote growth. Also the EU, provides this type of subsidies. As De Long and Summers (1991) suggest there may be market failure justifications for public subsidisation of firms. However, because the use of subsidies may cause problems, it is far from clear how they affect long-run economic growth. This study examines the effects on total factor productivity of public capital subsidies to firms in Sweden between 1987 and 1993. Panel data which distinguish between subsidised and unsubsidised firms in the manufacturing industry are used. The results suggest that subsidisation can influence growth, but there seems to be little evidence that the subsidies have affected productivity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Capital Subsidies and the Performance of Firms

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2000 by Kluwer Academic Publishers
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1023/A:1008133217594
Publisher site
See Article on Publisher Site

Abstract

In many countries, governments grant different capital subsidies to the business sector in order to promote growth. Also the EU, provides this type of subsidies. As De Long and Summers (1991) suggest there may be market failure justifications for public subsidisation of firms. However, because the use of subsidies may cause problems, it is far from clear how they affect long-run economic growth. This study examines the effects on total factor productivity of public capital subsidies to firms in Sweden between 1987 and 1993. Panel data which distinguish between subsidised and unsubsidised firms in the manufacturing industry are used. The results suggest that subsidisation can influence growth, but there seems to be little evidence that the subsidies have affected productivity.

Journal

Small Business EconomicsSpringer Journals

Published: Oct 8, 2004

References

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