Vertical Industrial Policy in the EU: An Empirical Analysis of the Effectiveness of State aid

laCaixa Economic Paper No. 01

42 Pages Posted: 5 Oct 2007

See all articles by Jordi Gual

Jordi Gual

University of Navarra - IESE Business School; CaixaBank; Centre for Economic Policy Research (CEPR)

Sandra Jodar-Rosell

La Caixa

Date Written: June 2006

Abstract

This paper assesses the effectiveness of vertical industrial policies within the EU. Vertical industrial policy is defined as government support for specific firms or industries (picking winners or supporting losers) and measured by state aid granted by Member States to the manufacturing sectors. This aid is authorized by EU regulations under certain conditions and regularly monitored. This paper uses Member States data on state aid to manufacturing to analyze the extent to which this government intervention affects the growth of Multifactor Productivity (MFP) in manufacturing. The analysis is conducted using both sectoral aid data and horizontal aid, since in many cases vertical aid is disguised as aid pursuing horizontal objectives. We control for the potential endogeneity of state aids policy. The results indicate that vertical state aid contributes positively to MFP growth.

Keywords: State Aids, Multifactor Productivity, Manufacturing Industry, Industrial Policy

JEL Classification: C23, L52, L53, L60, O47

Suggested Citation

Gual, Jordi and Jodar-Rosell, Sandra, Vertical Industrial Policy in the EU: An Empirical Analysis of the Effectiveness of State aid (June 2006). laCaixa Economic Paper No. 01, Available at SSRN: https://ssrn.com/abstract=1019223 or http://dx.doi.org/10.2139/ssrn.1019223

Jordi Gual (Contact Author)

University of Navarra - IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain
+34 3 253 4200 (Phone)
+34 3 253 4343 (Fax)

CaixaBank ( email )

Av Diagonal 629
Barcelona, 08028
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Sandra Jodar-Rosell

La Caixa ( email )

Av Diagonal 629
Barcelona, 08028
Spain

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