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Kiel Institute for World Economics Kiel Working Papers, Kiel Institute for World Economics

No 1607:
The effect of grant receipt on start-up size: Evidence from plant level data

Sourafel Girma, Holger Görg, Aoife Hanley and Eric Strobl

Abstract: In this paper we use plant level data on the start-up size of new plant entries and detailed information on the grants received by such plants in order to investigate whether grant receipt encourages plants to start-up with more employment than without support. The data relate to manufacturing plants in the Republic of Ireland, where industrial policy has a long history of using discretionary grants to encourage employment growth. We use a matching procedure to deal with the issue of selectivity into grant receipt, and a quantile regression estimator to allow for different effects of grants on plants depending on their position in the start-up size distribution. Our results provide evidence that grants do indeed encourage plants to start-up larger. We also find that this effect is generally higher for foreign than for domestic plants, and that it differs for plants at different quantiles of the start-up size distribution

Keywords: grants, subsidies, entry, start-up size; (follow links to similar papers)

JEL-Codes: H2,; L2; (follow links to similar papers)

35 pages, March 2010

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