Evaluation of public subsidies oriented to firms� performancea quasi-experimental approach

Resumen

Many regional governments in developed countries design programs to improve the competitiveness of local firms. In this paper, we use a quasiexperimental methodology to evaluate the effectiveness of public programs directed to increase firms� performance in Catalonia. For this purpose, we compare the performance of companies that have received public subsidies (treated) to that of similar companies that have not received it (non-treated). We use the Propensity Score Matching (PSM) methodology to construct a comparison group that is as similar as possible to the treatment group with respect to observable and non-observable characteristics, and that allows us to identify firms with the same propensity to receive public subsidies. Once we have a valid comparison group, we compare the performance of firms that effectively receive public subsidies to the performance of similar non-participant companies. We find that recipient firms, on average, have changed business practices, improved their performance and increased their value added as a direct result of public programs.