PUBLIC SUBSIDIES, FIRM PERFORMANCE AND INNOVATIONIN TRANSITION ECONOMIES

Gulaikhan Kubayeva, University of Salerno
AYeconomics-GAME seminars

• Abstract:

This paper evaluates the impact of public subsidies on innovation and performance indicators of 2729 firms across 29 transition economies in Eastern Europe and Central Asia during 2009 and 2013. We add to the existing literature by extending the little empirical evidence available for the group of transition economies and bringing panel techniques to these data, also applying a difference-in-differences framework. We mainly rely on entropy-based matching techniques and adopt as election-on-observables two-stage analysis as a robustness check. Our main conclusion is that public subsidies have a positive impact on innovation and employment growth, but no impact was observed on productivity and sales growth. The evidence also suggests that larger and privatized firms are subsidized more often but are less efficient in terms of performance and innovation.