European Funds and Firm Performance: Evidence from a Natural Experiment

José Mesquita (), João Pereira dos Santos () and José Tavares ()
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José Mesquita: Universidade Nova de Lisboa
João Pereira dos Santos: Queen Mary University of London
José Tavares: Universidade Nova de Lisboa

No 16526, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper analyses the impact of European Union (EU) funds on the performance of private firms. In particular, we examine a quasi-natural experiment consisting of a redrawing of administrative areas that expanded regional eligibility and led to a sudden increase in accessibility to EU grants for firms located in 33 Portuguese municipalities. Using a comprehensive linked employer-employee administrative dataset that covers the universe of private firms between 2003 and 2010, our difference-in-differences estimates uncover a significant and positive causal effect of increased eligibility on firms' sales, labour productivity, and average wages, while employment is not significantly altered. While firms' sales in the non-tradable sectors are positively impacted, firms' sales in more competitive, tradable, sectors remain unaffected by increased access to EU funds.

Keywords: grants; regional policy; private firm; municipalities; Portugal (search for similar items in EconPapers)
JEL-codes: C21 R10 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2023-10
New Economics Papers: this item is included in nep-bec, nep-eec, nep-eff, nep-eur, nep-lma and nep-sbm
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