Do Government Subsidies Stimulate Training Expenditure? Microeconometric Evidence from Plant Level Data

University of Nottingham Research Paper No. 2005/13

32 Pages Posted: 3 Aug 2005

See all articles by Holger Görg

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Eric Strobl

Ecole Polytechnique, Paris - Department of Economic Sciences; IZA Institute of Labor Economics

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Abstract

This paper examines whether financial assistance provided by government induces firms to spend more of their own funds on training expenditures, using plant level data for the Republic of Ireland. We pay particular attention to the potential problems in such an evaluation study, namely selectivity and endogeneity, by first identifying a valid counterfactual for grant receiving plants via a matching estimator and then employing a difference-in-differences technique on this matched sample. Our results show that there are differences in causal effects between domestic and foreign owned plants. For the former we find clear evidence that grant receipt stimulates private expenditure, while there are no statistically significant effects for foreign-owned plants based in Ireland.

Keywords: Training, government grants, matching, difference-in-differences

JEL Classification: J24, H25

Suggested Citation

Gorg, Holger and Strobl, Eric, Do Government Subsidies Stimulate Training Expenditure? Microeconometric Evidence from Plant Level Data. University of Nottingham Research Paper No. 2005/13, Available at SSRN: https://ssrn.com/abstract=764487 or http://dx.doi.org/10.2139/ssrn.764487

Holger Gorg (Contact Author)

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Eric Strobl

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany