The effects of EU-funded enterprise grants on firms and workers*



Murakozy, Balazs ORCID: 0000-0002-7666-428X and Telegdy, Almos
(2023) The effects of EU-funded enterprise grants on firms and workers*. JOURNAL OF COMPARATIVE ECONOMICS, 51 (1). pp. 216-234.

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Abstract

This paper investigates the effects of non-repayable enterprise grants on Hungarian SMEs, financed from the European Union's Structural and Cohesion Funds between 2004–2014. Comparing firm- and worker level outcomes of successful and unsuccessful applicants, we find that subsidized firms increase their employment, sales, capital-to-labor ratio and labor productivity, but we find conflicting results for total factor productivity. The skill composition of workers is not affected by the grant, but wages increase, although only for skilled workers and especially managers. These results suggest that the program generates additional investment, but that investment leads to limited technology upgrading at best. According to our simple calculations, the cost of creating an additional job with this program was equivalent to 3 years average wage and each year's grants contributed to aggregate SME labor productivity growth by 0.2-0.6 percentage points — with an annual cost often in excess of 1 percent of total SME value added.

Item Type: Article
Uncontrolled Keywords: Enterprise grants, Enterprise grants EU grants, grants Worker effects, Matched employer-employee data, Hungary
Depositing User: Symplectic Admin
Date Deposited: 07 Oct 2022 15:47
Last Modified: 10 Apr 2023 20:38
DOI: 10.1016/j.jce.2022.09.001
Open Access URL: https://doi.org/10.1016/j.jce.2022.09.001
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URI: https://livrepository.liverpool.ac.uk/id/eprint/3165275