Abstract
The paper compares the design and outcome of public subsidies to business across a number of industrialized countries. The comparison of the amount of subsidies shows that the share of GDP devoted to total public support is markedly lower in the USA than in Europe but the share of GDP devoted to support that improves economic performance is comparable. Implementing public support follows two models. The first model (Anglo-Saxon) model is primarily “soft” in nature and decentralized. The second model is more interventionist and centralized. The former model seems to perform better especially in term of science and technology. However, the impact of public support policies remains seriously under-researched and more research is crucially needed to draw firm conclusions.
Similar content being viewed by others
Notes
This is an independent academic body set up by law in 1963 with a mandate to periodically assess overall economic developments and to inform policy makers and the general public
References
Ades A, Di Tella R (1997) National champions and corruption: some unpleasant interventionist arithmetic. Econ J 107(443):1023–1042
Audretsch DB (2003) Standing on the shoulders of midgets: the U.S. Small Business Innovation Research Program (SBIR). Small Bus Econ 20:129–135
Aydin U (2007) Promoting industries in the global economy: subsidies in OECD countries, 1989 to 1995. J Eur Public Policy 14(1):115–131
Bergström F (1998) Capital subsidies and the performance of firms. SSE/EFI Working Paper Series in Economics and Finance, No. 285
Bloom N, Griffith R, Van Reenen J (2002) Do R&D tax credits work? Evidence from a panel of countries 1979–1997. J Public Econ 85:1–31
Buigues PA, Sekkat K (2009) Industrial policy in Europe, Japan and the USA: Amounts, mechanisms and effectiveness. Palgrave-McMillan
Chindooroy R, Muller P, Notaro G (2007) Company survival following rescue and restructuring State aid. Eur J Law Econ 24(2):165–186
Cohen E (2007) Industrial policies in France: the old and the new. J Ind Competition Trade 7:213–227
Devereux M, Griffith R, Simpson H (2007) Firm location decisions, regional grants and agglomeration externalities. J Public Econ 91:413–435
Dewatripont M, Seabright P (2006) Wasteful public spending and state aid control. J Eur Econ Assoc 4(2–3):513–522
Falk M (2004) What Drives Business R&D Intensity Across OECD Countries?. WIFO Working Paper No. 236/2004
Gual J, Jódar S (2006) Vertical industrial policy in the EU: an empirical analysis of the effectiveness of state aid. EIB Papers 11(2)
Guellec D, Van Pottelsberghe B (2003) The impact of public R&D expenditure on business R&D. Econ Innov New Technol 12(3):225–243
Harris R, Robinson C (2004) Industrial Policy in Great Britain and its effects on Total Factor Productivity in Manufacturing Plants, 1990–1998. Scott J Polit Econ 51(4)
Hyytinen A, Toivanen O (2003) Do Financial Constraints hold back Innovation and Growth? Evidence on the Role of Public Policy. ETLA Discussion Paper No.820
Jaumotte F, Pain N (2005) An overview of public policies to support innovation. OECD Economics Department Working Papers No. 456
Ketels HM (2007) Industrial policy in the United States. J Ind Competition Trade 7:147–167
Kokko A, Gustavsson P (2004) Regional integration, FDI, and regional development. EIB Papers, Volume 9, N° 1
Lach S (2002) Do R&D subsidies stimulate or displace private R&D? Evidence from Israel. J Ind Econ L:369–390
Lambert A, Kosenoky G (2006) Public Markets Tailored for the Cartel: Favoritism in Procurement Auctions. PSE, Paris-Jourdan Sciences Economiques, mimeo
Lerner J (1999) The Government as Venture Capitalist: The Long-Run Impact of the SBIR Program. Journal of Business. 72(3):285–319
London Economics (2004) Ex-post evaluation of the impact of rescue and restructuring aid on the international competitiveness of the sector(s) affected by such aid, Final Report to The European Commission - Enterprise Directorate-General
Mayer T (2004) Where do foreign firms locate in France and why?. EIB Papers 9(2)
Midelfart H, Overman H (2002) Delocation and European integration; is structural spending justified? Econ policy, October
Nail J, Brown H (2006) Identifying Technology Flows and Spillovers Through NAICS Coding of ATP Project Participants. NISTIR 7280 (Economic Study)
Nezu R (2007) Industrial policy in Japan. J Ind Competition Trade 7:229–243
Nolland M (2007) Industrial Policy, Innovation Policy, and Japanese Competitivness. W.P. 07-4, Peterson Institute for < international Economics, Washington
OECD (1998) Spotlight on public support to industry
OECD (2006) Evaluating government financing of business R&D: measuring behavioral additionality. OECD documents DSTI/STP(2006)6
OXERA (2006) Feasibility study for econometric assessment of the impact of tax credits on R&D expenditure. http://www.oxera.com/main.aspx?id=5362
Parisi ML, Sembellini A (2003) Is private R&D spending sensitive to its price? Empirical evidence on panel data for Italy. Empirica 30:357–377
Porter ME, Takeuchi H, Sakakibara M (2000) Can Japan compete? Mc Millan, Basingstoke
Rodrik D (2006) Industrial development: stylized facts and policies. JFK School of Government, Harvard Univeristy, Mimeo
Röller LR, Friederiszick HW, Neven DJ (2003) Evaluation of the effectiveness of state aid as a policy instrument. Report to DG ECFIN, European Commission
Schwartz G, Clements B (1999) Government subsidies. J Econ Surv 13(2):119–147
Skuras D, Tsekouras K, Dimara E, Tzelepis D (2006) The effects of regional capital subsidies on productivity growth: a case study of the Greek food and beverage manufacturing industry. J Reg Sci 46(2):355–381
Spector D (2009) State aids: economic analysis and practice in the European Union. In: Vives X (ed) Competition policy in the EU: fifty years on from the Treaty of Rome. Oxford University Press, Oxford, pp 176–202
W.T.O. Trade Report (2006) Subsidies, Trade and the W.T.O. pp. 45–226, July 2006
Wren C (2005) Regional grants: are they worth it? Fiscal Stud 26:2
Author information
Authors and Affiliations
Corresponding author
Additional information
The authors want to thank an anonymous referee, the editor and R. Meiklejohn for very helpful comments. They are also grateful to Professor Ch. Lehner for his assistance on the German case study, F. Ilzkovitz, E. Cohen, D. Guellec and participants to a seminar at the European Commission for very useful comments. This paper reflects the authors’ personal views only.
Rights and permissions
About this article
Cite this article
Buigues, PA., Sekkat, K. Public Subsidies to Business: An International Comparison. J Ind Compet Trade 11, 1–24 (2011). https://doi.org/10.1007/s10842-010-0074-1
Received:
Revised:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10842-010-0074-1