The Effects of Subsidies for Small and Medium-sized Firms: Matching and DID Analysis Based on Project Location and Type of Application

Author Name HASHIMOTO Yuki (Fellow (Policy Economist), RIETI) / HIRASAWA Toshihiko (University of Tokyo)
Creation Date/NO. June 2021 21-J-028
Research Project Comprehensive Research on Evidence Based Policy Making (EBPM)
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This study examines the policy effects of the subsidies for small and medium-sized firms in Japan (collectively called the Monozukuri Subsidy) conducted in FY2013. The effects of this subsidy have already been analyzed by Sekizawa, Makioka, and Yamaguchi (2020) for FY 2012 and FY 2013 projects using a regression discontinuity design and meta-analysis. In this study, we examine the effects of receiving the subsidies by matching and DID analysis using all samples that applied for subsidy projects in FY2013. The point is that we use a dataset that includes the "place of implementation," where the subsidized project actually took place, in order to remove the spillover effect. We also classify firms by application type and analyze the effect of subsidies on each type. The results show that the gross production and shipment amounts increased after firms received the subsidy. However, no significant difference in the outcome of value added per capita was observed due to the increase in the number of employees in the recipient firms. The result is consistent with Sekizawa, Makioka, and Yamaguchi (2020) in that we cannot say that the subsidy had a positive or negative effect on value added per capita for subsidy recipient firms. There was also no significant increase in outcomes for firms that engaged in both prototype development and capital investment compared to firms that made only capital investments. It must be noted that this study does not analyze non-manufacturing firms, nor take into account the impact of firms that also received the subsidy more than once since FY2012. There is still room for analysis in evaluating the subsidy program as a whole.