This paper analyzes the effects of an investment subsidy program for small and medium-sized enterprises in Flanders from 2004 to 2009. The subsidies were awarded according to a ranking system that favored young, growing and productive firms with a strong cash flow, granting subsidies to the highest scoring firms until the depletion of funds. The nature of this allocation system creates a sharp cut off in granting the subsidy according to the score, allowing us to estimate the causal impact of the subsidies using a regression discontinuity design. We find a positive effect on firm-level investment, employment, output and productivity for the firms that were granted the subsidy, but only for the small firms. However, the effect is small relative to the cost of the subsidy.

Various international institutions such as the European Commission, the ECB and the OECD often use unit labour costs as a measure of international competitiveness. The goal of this paper was to examine how well this measure is related to international export performance at the firm level. To this end, we use Belgian firm‐level data for the period 1999 to 2010 to analyse the impact of unit labour costs on exports. We find an estimated elasticity of the intensive margin of exports with respect to unit labour costs between −0.2 and −0.4. This elasticity varies between sectors and between firms, with more labour‐intensive firms having a higher elasticity. The microdata also enable us to analyse the impact of unit labour costs on the extensive margin. Our results show that higher unit labour costs reduce the probability of starting to export for non‐exporters and increase the probability of exporters stopping. While our results show that unit labour costs have an impact on the intensive margin and extensive margin of firm‐level exports, the effect is rather low, suggesting that pass‐through of costs into prices is limited. The latter is consistent with recent trade models emphasising that not only relative costs, but also demand factors such as quality and taste matter for explaining firm‐level exports.

No abstract

No abstract

This paper analyzes whether firms that engage in outward foreign direct investment, experience productivity gains in their domestic plants. To this end, we apply the methodology of De Loecker (2013) to firm-level data on the Slovenian manufacturing industry from 1994 to 2002. Our findings indicate that firms that invested abroad experience a higher productivity growth than firms that did not, controlling for many relevant variables such as past productivity, export status and industry of the firm. The gains only occur for investments outside of former Yugoslavia. They are larger for initially more productive firms and only occur some years after the investment.