Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73787
Authors: 
Hainz, Christa
Hakenes, Hendrik
Year of Publication: 
2009
Series/Report no.: 
Ifo Working Paper 71
Abstract: 
In the current recession, politicians grant state aid of yet unknown dimensions. But whatis the most efficient measure for granting such aid? We use a theoretical model withfirms that differ in their creditworthiness and compare different types of direct subsidieswith indirectly subsidized loans. We find that, in a large parameter range, politiciansprefer subsidized loans to direct subsidies, because these avoid windfall gains to entrepreneurs,and they economize on screening costs. For similar reasons, subsidized loansmay increase social welfare relative to subsidies. From a welfare perspective, politiciansuse subsidized loans inefficiently often.
Subjects: 
State aid
subsidized loans
public bank
governance
JEL: 
G21
G38
H25
Document Type: 
Working Paper

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