Investment Subsidies Effectiveness: Evidence from a Regional Program

Abstract I provide novel empirical evidence on the effectiveness of public funding in lagging behind areas by investigating effect a subsidy program implemented Campania region (South Italy) and targeting SMEs. By relying Difference-in-Differences approach, my estimates demonstrate that regional produces sizable increase private firms’ innovative investment spending. However, show also large heterogeneity response. In particular, find positive investment, compatible with input-additionality hypothesis, comes from medium-large firms low-tech enterprises. Finally, has considerable indirect effects low tech service labour demand but not overall productivity.