Do Investment Subsidies help to enhance Firm Performance in Germany?

What is it about?

This paper assesses firm-level effects of an investment subsidy programme in Germany, especially firms in East German regions that are sibsidized over the period 2007 to 2013. Based on administrative data, we apply a standard matching and difference-in-differences technique to identify the effects on the treated firms. The results suggest that investment subsidies have a positive impact on different dimensions of firm development, but do not affect overall firm competitiveness. We find positive short- and medium-run effects on firm employment, positive effects on the firm turnover in the medium run and positve short-term fixed capital formation.

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