Published 06 February 2013

Regional Investment Support

- An impact assessment in a world with many different kinds of support

The Swedish Agency for Growth Policy Analysis has been commissioned to evaluate the resources that the Government and agencies/authorities have allocated to entrepreneurship policy and the policy for small to medium-size enterprises (Appropriation directions for fiscal year 2011, commission 4). Within the framework of the commission, a total assessment is made of regional support for enterprise. The present report focuses on effects of regional investment support.

Regional investment support has been part of regional policy’s arsenal of funds since this policy area was introduced almost fifty years ago. The original form of the support, location support, was introduced to tackle problems that arose in the regions with balance between urban and rural areas. According to the current ordinance the aim of regional investment support is to promote sustainable growth in the enterprises that receive support and thereby sustainable regional growth. Regional investment support is the largest of the selective regional support programmes and over the past fifteen years the amount paid out has been between SEK 350 and 400 million per year.

Despite the fact that regional support has existed in various forms of funding in regional growth policy for almost half a century, there have been few formal microdata-based evaluations of its effects. The present report contributes to the knowledge base by evaluating the effects of investment support as regards the recipients’ survival, investments, number of people employed, production value, productivity and profitability.

The empirical analysis focuses on support paid between 2002 and 2007 and is based on a panel consisting of some 30,000 workplaces. Workplaces that received support are compared with comparable non-recipients within the framework of a matching approach known as conditional difference-in-differences. Judging from the results, regional investment support has positive effects on the survival, investments, number of people employed and production at the workplaces receiving support. A certain logic in the outcomes can be discerned. To begin with, the support leads to increased investment among the recipients. The number of employees also increases slightly to begin with and with time the effect on the number of people employed at the recipient workplaces increases. Later in the follow-up period, production value increases and towards the end of the period a positive impact on the recipient workplaces’ productivity can be discerned. Of the different outcomes, the comparatively large impact on the number of employees is the most tangible. A simple rough calculation indicates an average cost per new job of approximately SEK 375,000.

One of the strengths of this report is that thanks to Growth analysis’ microdatabase of state support to trade and industry (MISS) we have relatively good knowledge of the scope of other support. It is clear from the descriptive statistics presented in a study that regional investment support is part of a complex system of many different kinds of support for enterprise. The report discusses whether it is at all possible in such a context to evaluate effects of individual efforts. Arguments are put forward that this may be possible despite the difficulties involved. The validity of the arguments is tested by repeating the analysis in areas where other forms of support are uncommon. The positive effects prove to remain. The fact that the results obtained stand out as quite robust speaks in favour of regional support having positive effects on the recipient enterprises’ survival, investments, number of people employees and production. Effects that can also be distinguished in a complex world with many forms of support.

Title
Regional Investment Support - An impact assessment in a world with many different kinds of support

Serial number
WP/PM 2012:16

Reference number
2011/050

Download report (in Swedish)PDF