Assessing the microeconomic effects of public subsidies on the performance of firms in the czech food processing industry: A counterfactual impact evaluation

Abstract

Abstract The effects of European innovation and cohesion policies are very uneven throughout both regions and industries. Moreover, there are often only descriptive impact assessments of individual programmes available. In our study, we respond to this issue through the empirical analysis of the effects of the EU public policy on the example of the Czech food processing industry. We assess the impact of the Operational Programme Enterprise and Innovation (OPEI), which took place during the years 2007–2013. We applied counterfactual impact analysis based on firm‐level data with the aim of investigating the effects of this support on the financial performance of the supported enterprises ( N = 143, 70% of the supported companies) 2 years after the end of the intervention. The results show a positive effect on the performance of supported firms measured by a price‐cost margin, value added per labour cost, the growth of sales and growth of tangible assets. The study offers several policy implications. First, the policymakers should impose a reporting duty on the supported firms. That would help policymakers to conduct more easily programme evaluations. Second, they should employ the cost‐benefit analysis as a part of the programme evaluations in the future. Third, growth aspirations of the applicants for receiving public subsidies should be taken into account already during the application process.