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Evaluating the impact of public subsidies on a firm’s performance: a two-stage quasi-experimental approach

Author(s): Néstor Duch | Daniel Montolio | Mauro Mediavilla

Journal: Investigaciones Regionales
ISSN 1695-7253

Issue: 16;
Start page: 1436;
Date: 2009;
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Keywords: R&D policy | evaluation | firm performance | Propensity Score Matching

In this paper we evaluate the effectiveness of regional R&D public programs in Catalonia (Spain) with a two-stage procedure. Firstly, we compare the performance of publicly subsidised companies (treated) with that of similar, but unsubsidised companies (non-treated). We use the Propensity Score Matching (PSM) methodology to construct a control group which, with regard to its observable characteristics, is as similar as possible to the treated group, and that allows us to identify firms which maintain the same propensity to receive public subsidies. Secondly, and once a valid comparison group has been established, we compare the respective performance of each firm using regression techniques. As a result, we find that recipient firms, on average, seem to increase their value added as a direct result of public subsidy programs.

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