Working Paper: CEPR ID: DP13082
Authors: Jos Tavares; Joo Pereira dos Santos
Abstract: We take advantage of a quasi-natural experiment to assess the impact of European funds on firm dynamics in regions that, while not having their status changed, saw their neighbours increased access to European funds. Causality is established in a difference-in-differences intention to treat setting, using a rich dataset that considers the universe of Portuguese mainland municipalities from 2003 to 2010, and controlling for socio-economic, political and demographic variables. Our findings suggest a causal impact of between 1 and 2 percent in private sector firms´ entry and net entry rates, while we find no impact on firm exit rates. We consider time and space placebos to assure the reliability of our estimates. Our findings suggest that EU regional funds have a greater impact in times of distress, such as the world economic crisis, as far as entry rates are concerned. The analysis of the cross-section of firm demonstrates it is domestic owned micro firms in the primary and tertiary sectors that are most impacted by regional funds.
Keywords: quasi-natural experiment; european funds; firm creation; municipalities
JEL Codes: C21; R10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased access to European funds (O52) | Increase in private sector firms' entry rates (L26) |
| Increased access to European funds (O52) | Increase in net entry rates of firms (L26) |
| Increased access to European funds (O52) | No significant impact on firm exit rates (L19) |
| Increased access to European funds (O52) | Increased influence on domestic-owned micro firms in primary and tertiary sectors (E69) |