A Bitter Aftertaste: How State Aid Affects Recipient Firms and Their Competitors in Europe
IMF Working Papers, December 16, 2024
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- A Bitter Aftertaste: How State Aid Affects Recipient Firms and Their Competitors in Europe
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Bibliographic details
- Authors: Luis Brandao Marques, Hasan H Toprak
- Published: December 16, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400295706.001
Research scope and methodology
- Examines state aid received between 2016 and 2023.
- Sample: listed nonfinancial firms in Belgium, France, Germany, the Netherlands, Spain, and the United Kingdom (until 2020).
- Identification: uses a high-frequency identification approach to address endogeneity.
- Authors: Luis Brandão-Marques, Hasan H Toprak.
- Date: December 16, 2024.
- Pages: 41; Volume: 2024; Issue: 250; Series: Working Paper No. 2024/250.
- DOI: https://doi.org/10.5089/9798400295706.001; Stock No: WPIEA2024250; ISBN: 9798400295706; ISSN: 1018-5941.
Key empirical findings
- Recipient-firm outcomes:
- Firms that receive state aid increase employment.
- Firms that receive state aid increase revenue.
- State aid does not increase investment.
- State aid does not increase labor productivity.
- Spillover effects:
- There are adverse spillover effects to competing firms.
- These adverse spillovers significantly undo any positive own effects for recipient firms.
Policy implications and recommendations
- If state aid to firms in the European Union is warranted, it should be provided at the European level instead of the member state level to mitigate adverse spillovers.
- Pooling resources and competitively allocating aid across the Union could:
- Preserve market competition.
- Encourage firm entry.
- Ensure a more efficient distribution of funds.
IMF Working Paper by Luis Brandão-Marques and Hasan H Toprak, "A Bitter Aftertaste: How State Aid Affects Recipient Firms and Their Competitors in Europe", December 16, 2024; Working Paper No. 2024/250; DOI: https://doi.org/10.5089/9798400295706.001.
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