1. LESSONS FROM THE EVALUATION OF TWO ITALIAN ENTERPRISE SUPPORT PROGRAMMES Daniele Bondonio Alberto Martini et al.

2. The two programmes One national, targeted to all firms but focused on the South One regional (the combination of 29 measures in Piemonte, for which only SMEs were eligible)

3. PIEMONTE Torino Fiat Holy Shroud 2006 WinterOlympics Home of the 2012 CIE Summer School (Aug 30-Sep 9) Home of the 2010 CIE Summer School at PRACATINAT

4. A nation-wide programme targeted to industrial firms in disadvantaged areas, to support investments in physical capital, providing non-repayable grants No limit on firm size, but mostly small firms 50% of grant recipients 500 Average grant size 420,000 Total outlays 2.6 billion in 2000-2006 Law 488/92

5. multitude of support measures for SMEs in Piemonte About 10,000 recipients 1500capital grants (14%) 7800interest-rate grants (75%) 1000soft-loans (10%) Average equivalent value of subsidies = 10,600 Total resources spent in 2005-09 = 120 million 29 ways to help SMEs in PIEMONTE

6. What are the effects of these programmmes on employment, sales and investment? Which difference does public support make for different firms? Which evidence can be trusted for future decisions?

7. Used a rigorous approach Jobs due to the subsidy = change in employment among subsidized firms change in employment among subsidized firms if they had not been subsidized ( the latter is known as counterfactual, and can never be observed)

8. IN PRACTICE WHAT IS DONE IS TO FIND A PROXY FOR THE COUNTERFACTUAL Jobs due to the subsidy = change in employment among subsidized firms - change in employment among NON subsidized firms THAT ARE IDENTICAL TO THE SUBSIDIZED FIRMS IDENTICAL ……. VERY SIMILAR …….. WITH THE SAME OBSERVABLE CHARACTERSITICS

9. Law 488 used rankings based on five indicators, one of which wasjobs to be created Rejected and accepted firms share the same willingness to invest, and the residual differences can be more easily eliminated through matching techniques So we used matching techniques on applicants firms using outcome data provided by ISTAT AND WE GOT SOME INTERESTING RESULTS

10. Lets do the official calculations Funds disbursed for Law 488 2,600,000,000 target jobs (TARGET ACHIEVED) 82,000 jobs Cost per job 31,700 Number of firms subsidized = 6,189 Impact of subsidy = 1.82 additional jobs per firm Number of jobs really created = 11,236 Cost per job really due to the subsidy = 231,207 OUR CALCULATIONS

11. The results are very different for the 29 programs for SME 1.82 232, 000 Law 488

12. Is this enough evidence to prove that SMALL IS BEAUTIFUL? CERTAINLY NOT YET!

13. Does the size of 488 grants matter?

14. Is it the size of the firm to make a difference?

15. capital grants interest-rate grants soft-loans WHICH ONE IS MORE COST- EFFECTIVE? The ways to help SMEs in PIEMONTE

16. POLICY IMPLICATION: MAKE NO PRESENTS, HELP THEM TO GET CHEAPER FINANCING (EITHER WITH LOANS EITHER PAYING THEIR INTEREST COST) AND THE WINNERS ARE

17. SUMMARY OF THE RESULTS Holding everything else constant….. Large grants are less cost-effective than smaller grants Grants to large firms are not cost effective Re-payable assistance is more effective than capital grants Results suggest that credit market imperfections for SMEs are the main issue that may justify public intervention

18. No evidence of effect on the quality of the jobs generated by the subsidies Sales and investment results follow the same pattern of employment (albeit with some additional volatility due to data quality)

19. page SHOWS THESE RESULTS TO THE POLICY MAKER HO HO HO HOLY SHIT!

20. FOR CHRISTMAS WE WILL GET NO PRESENTS, ONLY SOFT LOANS, AND THOSE WHO HAVE BEEN REALLY NAUGHTY WILL GET ITALIAN GOVERNMENT BONDS

21. HO HO HO EU R HO