DP17362 European Funds and Firm Performance: Evidence from a Natural Experiment

Author(s): José Mesquita Gabriel, João Pereira dos Santos, José Tavares
Publication Date: June 2022
Keyword(s): European funds, firm performance, municipalities, quasi-natural experiment
JEL(s): C21, R10
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17362

Expanding regional eligibility in the access to grants can have important consequences for the performance of firms. We examine a quasi-natural experiment that consisted of an administrative redistricting intended to increase accessibility to European Union (EU) funds using a rich administrative dataset that covers the universe of Portuguese private firms between 2003 and 2010. Our results uncover a positive causal impact of increased eligibility on firms' sales. In contrast, employment and labour productivity do not seem significantly impacted by the reform. The effects are heterogeneous: while sales of firms in the services and non-tradable sectors are positively impacted, sales of firms in more competitive sectors are not affected.