Scandinavian Working Papers in Economics

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

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

Håkan Gadd , Gustav Hansson and Jonas Månsson ()
Additional contact information
Håkan Gadd: Swedish Institute for Growth Policy Studies (ITPS), Postal: Swedish Institute for Growth Policy Studies Studentplan 3 , SE-831 40 Östersund, Sweden
Gustav Hansson: Swedish Insitute for Growth Policy Studies (ITPS), Postal: Swedish Institute for Growth Policy Studies Studentplan 3 , SE-831 40 Östersund, Sweden, Sweden
Jonas Månsson: Centre for Labour Market Policy Research (CAFO), Postal: Centre for Labour Market Policy Research (CAFO), Dept of Economics and Statistics, School of Management and Economics, Växjö University , SE 351 95 Växjö, Sweden

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

JEL-codes: C01; E20; H32; O18; R11

25 pages, July 20, 2008

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

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