The goal of this paper is to understand whether, firm’s subsidies in Italy are inspired by precise criteria for selecting projects, in an overall policy design aimed in pursuing the general objectives and affect the structural characteristics of Italian industry, or whether these interventions tend to conform to a general attitude of favor toward specific characteristics of enterprises in terms of size, capital intensity, geographical location.
Methods and Results
The empirical investigation, carried out on a sample of 4,230 Italian manufacturing firms, aims to compare ex-ante companies subsidized and unsubsidized, through comparative analysis of certain characteristics such as size, productive specialization, geographical location, trade openness, belonging to consortium, group or value chain, labor and capital productivity etc. In terms of methodology, the work implements a model of Propensity Score Matching (PSM), which allows to compare two subsets of companies. The PSM results are supported by further Probit estimates for a robustness check.
The results of the empirical survey show that the subsidized Italian company is relatively larger, more capitalized and more internationalized. Located mainly in the South, it is characterized by low productivity of capital, without significant advantages in terms of total factor productivity. The distribution of subsidies seems to tend to reproduce the existing structural setting of the national production system, without clear guidelines to support specific production sectors or segments of Italian industry more productive and innovative. Overall, the evidence supports therefore a limited capacity of public intervention to reward projects with major economic benefits, since the subsidies are in fact converge mainly to larger and more capitalized firms.
Keywords: Public subsidies, firms, manufacturing industry, screening rules, firms characteristics
Jel Code: H2, D22, D24