Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 283: Characteristics of Government Supported Firms

Fredrik Bergström
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Fredrik Bergström: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden

Abstract: Governments all over the world grant different types of subsidies to firms which are said to have a lack-of-capital problem. However, it is unclear if governments have the information and motivation to target firms which have problems to finance profitable project via the private capital markets. Based on hypotheses derived from interest group theory, this paper compares (econometrically) characteristics of Swedish firms targeted for selective regional policy supports with randomly chosen non-supported firms. The results give some support for an interest group interpretation of the allocation of subsidies.

Keywords: Allocation of subsidies; regional policy; industrial policy; interest group theories

JEL-codes: H20; H81; L52; L98; R58

27 pages, November 23, 1998

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