Public subsidies, TFP and efficiency : a tale of complex relationships

Bernini, Cristina ; Cerqua, Augusto ; Pellegrini, Guido (2015) Public subsidies, TFP and efficiency : a tale of complex relationships. Bologna, IT: Dipartimento di Scienze Statistiche "Paolo Fortunati", Alma Mater Studiorum Università di Bologna, p. 55. DOI 10.6092/unibo/amsacta/4282. In: Quaderni di Dipartimento. Serie Ricerche (2). ISSN 1973-9346.
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This paper shows that a suitable decomposition of TFP can be applied to a large sample of subsidized firms for a relevant period of time, allowing an evaluation of the impact of subsidies on either the roles of technical progress and technical efficiency change or scale and allocative efficiency change as determinants of granted firms’ long-term growth. We measure and decompose TFP using a Stochastic Frontier Analysis (SFA). The impact of capital subsidies on the different components of TFP is captured by a quasi–experimental method (Multiple RDD), exploiting the conditions for a local random experiment created by Law 488/92 (L488), which has been an important policy instrument for reducing territorial disparities in Italy. The main findings from the case study are twofold. First, capital subsidies positively affect TFP growth in the medium-long term and not in the short term. The main reason is that allocative efficiency has a positive effect only after 2-3 years. Second, the positive impact comes especially through technical progress and not through scale impact change, as may have been expected.

Document type
Monograph (Working Paper)
Bernini, Cristina
Cerqua, Augusto
Pellegrini, Guido
Policy evaluation, Public subsidies, TFP decomposition, Regression discontinuity design Vautazione delle politihe, Finanziamenti Pubblici, decomposizione delle TFP, Regression discontinuity design
Deposit date
11 Jun 2015 10:01
Last modified
04 Apr 2016 15:31

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