Université de Lausanne
Ecole des HEC
Département d'économétrie et d'économie politique

Mercredi 20 mai 2009, 13h00
Extranef, Dorigny, salle 126

Henry OVERMAN
(LSE, London, U.K.)

The causal effects of an industrial policy

Abstract
Industrial or business support policies designed to raise productivity and employment are a common feature of the policy landscape, especially in the wake of the financial crisis. Rigorous micro-econometric evaluation of their causal effects is rare primarily because of the difficulty of achieving credible identification. We exploit multiple changes in the area-specific eligibility criteria for a major UK program ("Regional Selective Assistance"). Area eligibility is governed by pan-European state aid rules which change over time. We match twenty years of administrative panel data on the population of plants to the population of program participants to investigate the causal impact of the policy on jobs, investment, productivity and entry/exit. Using an instrumental variable approach we find that the program has had a positive effect on both employment and investment, which naïve estimators underestimate. There is no statistically significant effect on total factor productivity. Single plant firms have a much larger treatment effect than plants belonging to multi-plant firms who may be effectively "gaming" the system. There is also some evidence that the program, by supporting less efficient enterprises, may slow down reallocation from less efficient plants, negatively affecting aggregate productivity growth.

Web site of the seminar (with paper online): http://www.hec.unil.ch/deep/evenements-english/e-sem-all-2008-09.htm