Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273791 
Year of Publication: 
2022
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2022-078/IV
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
We use project-level information for the largest regional economic development program in German history to study whether government subsidies to firms affect quantity and quality of bank lending. We combine recipient firms under the Improvement of Regional Economic Structures program (GRW) with their local banks during 1998-2019. The modalities of GRW subsidies to firms are determined at the EU level. Therefore, we use it to identify bank outcomes. Banks with relationships to more subsidized firms exhibit higher lending volumes without any significant differences in bank stability. Subsidized firms, in turn, borrow more indicating that banks facilitate regional economic development policies
Subjects: 
Government subsidies
Financial intermediation
Bank stability
JEL: 
G21
G28
H25
Document Type: 
Working Paper

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