--- title: "Subsidies, Shadow of Death and Productivity" authors: - name: "Koski, Heli" url: "https://www.etla.fi/henkilot/koski-heli/" sameAs: - "https://twitter.com/heli_koski" - name: "Pajarinen, Mika" url: "https://www.etla.fi/henkilot/pajarinen-mika/" sameAs: - "https://orcid.org/0000-0001-9087-5991" - "https://scholar.google.com/citations?user=7sGKgwsAAAAJ" date_published: "2013-08-05" series: "ETLA Working Papers" series_number: "16" issn: - "2323-2420" - "2323-2439" jel_codes: - "D24" - "J23" - "L10" - "L53" - "O25" language: "en" publisher: "ETLA Economic Research" pdf_url: "https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-16.pdf" keywords: - "productivity" - "business subsidies" - "firm exit" - "enterprise policy" - "technology policy" identifier: "https://www.etla.fi/julkaisut/id/ETLA-Working-Papers-16" --- # Subsidies, Shadow of Death and Productivity **Published:** 2013-08-05 **Categories:** Julkaisut, Working Papers **URL:** https://www.etla.fi/julkaisut/subsidies-shadow-death-productivity/ Abstract Our panel data from over 10,000 Finnish firms during the years 2003-2010 sheds light on the effect of different business subsidies on firm productivity performance and on the relationship between firms’ lagged labor productivity and market exit. We find that not any of the subsidy types have statistically significant short-term or longer term impacts on the firms’ productivity performance. It seems that particularly employment and investment subsidies tend to be allocated to the relatively less efficient companies. We further observe that a decline in the firm’s lagged labor productivity levels are clearly more weakly related to the subsidized firms’ exit than to the exit of firms that have not received any subsidies. Our empirical findings thus hint that the allocation of subsidies to the relatively inefficient firms increases their liquidity making their market exit less likely than it would be otherwise. In other words, our data indicate that subsidy allocation weakens the shadow of death phenomenon observed in the previous empirical studies and hinders the process of creative destruction in the economy. Tiivistelmä Tutkimuksessa analysoidaan ensiksi erilaisten yritystukien vaikutuksia yritysten työn tuottavuuteen sekä toiseksi tuottavuuden ja yritysten markkinoilta poistumisen yhteyttä. Aineistona on yli 10 000 suomalaista vähintään 10 henkeä työllistävää yritystä vuosilta 2003–2010. Yritystuilla ei havaita selkeitä positiivisia tuottavuus-vaikutuksia lyhyellä (1 v.) eikä pidemmällä (3–5 v.) tarkastelujaksolla. Tulokset indikoivat, että etenkin työllisyys- ja investointitukia allokoidaan usein keskimääräistä heikomman tuottavuuden yrityksille. Havaitsemme lisäksi, että tuottavuuden heikkenemisen ja markkinoilta poistumisen välinen yhteys on merkittävästi heikompi yritystukia saaneilla yrityksillä verrattuna tukia saamattomiin yrityksiin. Tulokset viittaavat siihen, että tukien allokoiminen suhteellisesti keskimääräistä tehottomampiin yrityksiin parantaa niiden rahoitusasemaa ja siten alentaa niiden markkinoilta poistumisen todennäköisyyttä heikentäen luonnollista luovan tuhon ja uusiutumisen prosessia yrityskentässä. --- ## Additional Information **Kirjoittajat:** Koski, Heli - Pajarinen, Mika **Kansikuva:** https://www.etla.fi/wp-content/uploads/no_016_kansi-1.jpg **Lataa Pdf:** https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-16.pdf **Key Words:** productivity, business subsidies, firm exit, enterprise policy, technology policy **Avainsanat:** tuottavuus, yritystuet, luova tuho, elinkeinopolitiikka, teknologiapolitiikka **Jel:** D24, J23, L10, L53, O25 **Paivays:** 05.08.2013 **Sivuja:** 28 15 **Kieli:** en **Sarja:** ETLA Working Papers **Sarja Nro:** 16 **Issn:** 2323-2420, 2323-2439 **Saatavuus:** 1 **Publication Research:** No ## Bibliographic metadata (JSON-LD) ```json { "@context": "https://schema.org", "@type": "ScholarlyArticle", "@id": "https://www.etla.fi/julkaisut/id/ETLA-Working-Papers-16", "headline": "Subsidies, Shadow of Death and Productivity", "inLanguage": "en", "publisher": { "@type": "Organization", "name": "ETLA Economic Research", "url": "https://www.etla.fi", "logo": { "@type": "ImageObject", "url": "https://www.etla.fi/wp-content/uploads/logo-etla_logo.svg" } }, "datePublished": "2013-08-05T00:00:00+00:00", "author": [ { "@type": "Person", "name": "Koski, Heli", "url": "https://www.etla.fi/henkilot/koski-heli/", "sameAs": [ "https://twitter.com/heli_koski" ] }, { "@type": "Person", "name": "Pajarinen, Mika", "url": "https://www.etla.fi/henkilot/pajarinen-mika/", "sameAs": [ "https://orcid.org/0000-0001-9087-5991", "https://scholar.google.com/citations?user=7sGKgwsAAAAJ" ] } ], "abstract": "", "keywords": [ { "@type": "DefinedTerm", "name": "productivity", "@language": "en" }, { "@type": "DefinedTerm", "name": "business subsidies", "@language": "en" }, { "@type": "DefinedTerm", "name": "firm exit", "@language": "en" }, { "@type": "DefinedTerm", "name": "enterprise policy", "@language": "en" }, { "@type": "DefinedTerm", "name": "technology policy", "@language": "en" }, { "@type": "DefinedTerm", "name": "tuottavuus", "@language": "fi" }, { "@type": "DefinedTerm", "name": "yritystuet", "@language": "fi" }, { "@type": "DefinedTerm", "name": "luova tuho", "@language": "fi" }, { "@type": "DefinedTerm", "name": "elinkeinopolitiikka", "@language": "fi" }, { "@type": "DefinedTerm", "name": "teknologiapolitiikka", "@language": "fi" } ], "isPartOf": { "@type": "PublicationIssue", "issueNumber": "16", "isPartOf": { "@type": "Periodical", "name": "ETLA Working Papers", "issn": [ "2323-2420", "2323-2439" ] } }, "mainEntityOfPage": "https://www.etla.fi/julkaisut/subsidies-shadow-death-productivity/", "url": "https://www.etla.fi/julkaisut/subsidies-shadow-death-productivity/", "associatedMedia": { "@type": "MediaObject", "@id": "https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-16.pdf", "encodingFormat": "application/pdf", "contentUrl": "https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-16.pdf" }, "sameAs": [ "https://www.etla.fi/julkaisut/subsidies-shadow-death-productivity/", "https://www.etla.fi/en/publications/subsidies-shadow-death-productivity/", "https://www.etla.fi/sv/publikationer/subsidies-shadow-death-productivity/" ] } ```