Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/274866 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 15 [Issue:] 8 [Article No.:] 344 [Year:] 2022 [Pages:] 1-42
Publisher: 
MDPI, Basel
Abstract: 
An issue with estimating the impact of industrial support is that the firms that receive support may be politically connected, introducing omitted variable bias. Applying fixed-effects regressions on Vietnamese panel data containing several proxies for political connectedness to correct this bias, we find that firms that receive industrial support in the form of tax holidays experience more rapid productivity growth, particularly in R&D-intensive industries, and less so among politically connected firms. These findings do not appear to be due to the presence of financing constraints. We then develop a second-generation Schumpeterian growth model with many industries, and show that tax holidays disproportionately raise productivity growth in R&D-intensive industries. These results are significant and important for governments, especially those in transition and developing countries, in better targeting their industrial policy to facilitate higher productivity growth.
Subjects: 
industrial subsidies
political connections
productivity growth
R&D intensity
Schumpeterian models
tax holidays
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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