Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126498
Authors: 
Ciaian, Pavel
Kancs, d'Artis
Michalek, Jerzy
Year of Publication: 
2015
Series/Report no.: 
LICOS Discussion Paper Series 370
Abstract: 
The main objective of the present paper is to estimate the extent to which firm investment is substituted (crowded-out) by investment support policies granted under the EU Rural Development Programme (RDP). In the empirical analyses we employ the difference-in-difference propensity score matching approach, which allows us to address several important sources of bias, such as selection bias, the simultaneity bias, and functional form misspecification, from which many previous studies suffer. Using panel data of 1,333 firms from the Schleswig-Holstein region in Germany, we find that the crowding-out effect of the RDP is close to 100%, implying that firms use public support to substitute for private investments. Furthermore, no evidence was found that, due to RDP programme support, firms would have brought forward their investments planned originally in a later period, rejecting the f inter-temporal substitution of investments.
Subjects: 
investment subsidy
crowding-out
substitution effect
additionality
subsidy leverage
propensity score matching
JEL: 
F1
O1
R3
R4
Document Type: 
Working Paper

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