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Industrial policy: Political considerations, payoffs, and peculiar incentives
Jönköping University, Jönköping International Business School, JIBS, Economics.ORCID iD: 0000-0002-9173-8347
2018 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of four independent papers. They deal with some aspects of industrial policy, namely public supports to firms that are intended to support innovation and growth at the firm level, using Swedish data. Two papers study the efficiency of current Swedish policies by estimating the effects of subsidies and public loans to firms, respectively.

The results on subsidized firms suggests that there are some positive effects on profits and productivity, but these diminish and disappear over time. The results of public loans are more positive with long lasting effects on productivity and sales but only for smaller firms. Public loans do not lead to an increase in the number of employees in the firms that receive them.

The third paper studies the selection of firms for subsidies and the incentives firms have to seek them. By modeling the decision to seek subsidies as a trade off between producing in the market and seeking grants, the results suggest that firms with low market productivity might self-select into seeking grants. The empirical results are in line with the theoretical predictions.

The final paper studies the incentives that politicians have to implement programs and policies that they know will be inefficient. Since a lack of political action can make the politicians look incompetent, incumbentens have incentives to implement policies even though they know that these will be ineffective, to signal competence towards the voters.

Abstract [sv]

Denna avhandling består av 4 oberoende uppsatser. De studerar några aspekter av aktiv näringspolitik, mera bestämt effekten av offentliga lån och stöd som syftar till att öka tillväxten och innovationsförmågan i företag med hjälp av svenska data. Dessa åtgärder syftar till att lösa marknadsmisslyckanden på kapitalmarknaden, som annars kan leda till att företag saknar de finansiella resurserna som de behöver för att investera i fysiskt- eller humankapital. Om staten kan identifiera dessa företag och hjälpa dem med finansiering så kan dessa företag investera och växa, vilket i sin tur ökar den ekonomiska tillväxten. Två uppsatser studerar effektivitet i nu existerande svenska åtgärder genom att mäta effekterna av statliga bidrag samt lån till företag. En kombination av matchning och difference-in-difference regressioner används för att reducera problem som beror på selektering.

Resultaten visar att företag som får bidrag får ökade vinster och högre produktivitet, men bara på kort sikt. Resultaten för offentliga lån är mera positiva, med långvariga positiva effekter på produktivitet och försäljning, men bara för de mindre företagen. Offentliga lån leder inte till att företag anställer flera.

Den tredje uppsatsen studerar vilka incitamenten som företag som söker stöd har. Genom att modellera beslutet som ett val mellan att producera för marknaden eller söka stöd så visar modellen att företag med låg marknadsproduktvitet bör ägna mer tid åt att söka stöd eftersom de har lägre alternativ kostnad. De empiriska resultaten är i linje med vad modellen förutsäger.

Den fjärde och sista uppsatsen studerar vilka incitamenten som politiker har att implementera åtgärder som de på förhand är ineffektiva. Ifall det är svårt att lösa ett samhällsproblem kan det fortfarande vara rationellt att införa ineffektiva åtgärder eftersom brist på aktivitet kan signalera inkompetents gentemot väljarna. Ifall väljarna har imperfekt information om olika åtgärders effektivitet kan själva handlingen i sig vara mera viktig än handlingens effektivitet.

Place, publisher, year, edition, pages
Jönköping: Jönköping University, Jönköping International Business School , 2018. , p. 205
Series
JIBS Dissertation Series, ISSN 1403-0470 ; 125
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-41139ISBN: 978-91-86345-87-7 (print)OAI: oai:DiVA.org:hj-41139DiVA, id: diva2:1238611
Public defence
2018-09-21, B1014, Jönköping International Business School, Jönköping, 10:00 (English)
Opponent
Supervisors
Available from: 2018-08-14 Created: 2018-08-14 Last updated: 2018-08-14Bibliographically approved
List of papers
1. The “sugar rush” from innovation subsidies: a robust political economy perspective
Open this publication in new window or tab >>The “sugar rush” from innovation subsidies: a robust political economy perspective
2016 (English)In: Empirica, ISSN 0340-8744, E-ISSN 1573-6911, Vol. 43, no 4, p. 729-756Article in journal (Refereed) Published
Abstract [en]

The governments of most advanced countries offer some type of financial subsidy to encourage firm innovation and productivity. This paper analyzes the effects of innovation subsidies using a unique Swedish database that contains firm level data for the period 1997–2011, specifically informa tion on firm subsidies over a broad range of programs. Applying causal treatment effect analysis based on matching and a diff-in-diff approach combined with a qualitative case study of Swedish innovation subsidy programs, we test whether such subsidies have positive effects on firm performance. Our results indicate a lack of positive performance effects in the long run for the majority of firms, albeit there are positive short-run effects on human capital investments and also positive short-term productivity effects for the smallest firms. These findings are interpreted from a robust political economy perspective that reveals that the problems of acquiring correct information and designing appropriate incentives are so complex that the absence of significant positive long-run effects on firm performance for the majority of firms is not surprising.

Place, publisher, year, edition, pages
Springer, 2016
Keywords
Causal treatment effect evaluation, CEM, Firm performance, Innovation subsidies, Market failures, Robust political economy
National Category
Economics
Identifiers
urn:nbn:se:hj:diva-31189 (URN)10.1007/s10663-016-9350-6 (DOI)000386371800004 ()2-s2.0-84978160697 (Scopus ID)
Available from: 2016-08-09 Created: 2016-08-09 Last updated: 2018-09-05Bibliographically approved
2. Take it to the (public) bank: The efficiency of public bank loans to private firms
Open this publication in new window or tab >>Take it to the (public) bank: The efficiency of public bank loans to private firms
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Incomplete capital markets and credit constraints are often considered obstacles to economic growth, thus motivating government interventions in capital markets. One such intervention is governmental bank loans targeting credit-constrained small and medium-sized enterprises (SMEs). However, it is less clear to what extent these interventions result in firm growth and whether governmental loans should target firms that are not receiving private bank loans (the extensive margin) or work in conjunction with private bank loans (the intensive margin). Using a unique dataset with information on state bank loans targeting credit-constrained SMEs with and without complementary private bank loans, this paper contributes to the literature by studying how these loans affect the targeted firms. The results suggest that positive effects are found on firm productivity and sales for firms with 10 or fewer employees, while no evidence is found of employment effects. This lack of employment effect suggests that a lack of external credit is not the main obstacle to SME employment growth.

National Category
Economics
Identifiers
urn:nbn:se:hj:diva-41136 (URN)
Available from: 2018-08-14 Created: 2018-08-14 Last updated: 2018-08-14Bibliographically approved
3. Subsidy entrepreneurs
Open this publication in new window or tab >>Subsidy entrepreneurs
(English)Manuscript (preprint) (Other academic)
Abstract [en]

In this paper, we study the selection, incentives, and characteristics of small and medium sized firms (SMEs) that apply for and eventually receive one or multiple governmental grants intended to stimulate innovation and growth. The analysis departs from a rent-seeking model in which firms are free to allocate their effort between production and rent-seeking. We show that highly productive firms choose not to seek grants, while moderately productive firms allocate a share of their effortto rent-seeking, and low-productivity firms are incentivized to allocate most, if not all, of their effort to seeking grants and can thus be called subsidy entrepreneurs. Due to their large efforts in seeking grants, these low-productivity firms also havea relatively high probability of receiving grants. Using detailed data over all grants administered by the three largest grant-distributing agencies in Sweden, the empirical analysis suggests that supported firms have relatively low productivity, high wages, and a larger share of workers with higher education than non-supported firms. These characteristics become further pronounced as we move from single to multiple supported firms, thus providing support for the notion of subsidy entrepreneurs.

National Category
Economics
Identifiers
urn:nbn:se:hj:diva-41137 (URN)
Available from: 2018-08-14 Created: 2018-08-14 Last updated: 2018-08-14Bibliographically approved
4. Busy doing nothing - Why politicians implement inefficient policies
Open this publication in new window or tab >>Busy doing nothing - Why politicians implement inefficient policies
(English)Manuscript (preprint) (Other academic)
Abstract [en]

A substantial body of literature suggests that politicians are blocked from implementing efficient reforms that solve substantial problems because of special interest groups or budget constraints. Despite the existing mechanisms that block potentially efficient reforms, real-world data show that a large number of new programs and policies are implemented every year in developed countries. These policies are often selective and considered to be fairly inefficient by ex post evaluation, and they tend to be small in size and scope. With this background, this paper studies the reasons why a rational politician would implement an inefficient public policy that is intended to obfuscate the difficulties in achieving reforms. The paper uses a simple competence signaling model that suggests that if an effective reform is impossible, engaging in strategic obfuscation through an inefficient program increases the probability of winning a re-election compared to doing nothing at all. This is because an inefficient reform does not lead voters to believe that the politician is incompetent, which a lack of action risks doing. Intentional inefficiency aiming to obfuscate the difficulty of efficient reforms can therefore complement the previous theories’ explanations of political failure.

National Category
Economics
Identifiers
urn:nbn:se:hj:diva-41138 (URN)
Available from: 2018-08-14 Created: 2018-08-14 Last updated: 2018-08-14Bibliographically approved

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