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Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University CAFO Working Papers, Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University

No 2009:3:
Evaluating the impact of firm subsidy using a multilevel propensity score approach

Håkan Gadd, Gustav Hansson and Jonas Månsson ()

Abstract: In this paper, we investigate if firms who received the Regional Development Grant are performing better than firms that did not receive the subsidy. Using data on Swedish stock companies, we firstly estimate a multilevel logit model of the probability of receiving the subsidy. The multilevel approach enables us to adequately take into account the regional context. Secondly, we use propensity score matching to assess the successfulness of the subsidy. The results show that firm characteristics and regional context matters for the probability of receiving the subsidy. Subsidized firms increased their firm size compared to non-subsidized firms’, however; we find no evidence that the subsidized firms have any higher profitability.

Keywords: Subsidy; Policy evaluation; Firm profitability; Employment growth; Regional development; Multilevel; Propensity score matching; (follow links to similar papers)

JEL-Codes: C01; E20; H32; O18; R11; (follow links to similar papers)

25 pages, July 20, 2008

Corresponding Author: Associate Professor Jonas Månsson, jonas.mansson@vxu.se

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