Template-Type: ReDIF-Paper 1.0
Title: Future Versus Today’s Improvements: The Trade-off of Place-Based Policies
Author-Name: Max Brès
Author-Email: 
Author-Name: Philipp Kircher
Author-Email: 
Author-Name: David Koll
Author-Email: 

Classification-JEL: H25, J21, J31
Keywords: subsidy allocation, place-based policies, manufacturing, R&D, employment and wages, underperforming areas

Abstract: This paper provides causal evidence on the impact of subsidy re-allocation between
high technology sectors and low-skill sectors on local labor markets. We exploit
a policy targeting under-performing employment areas, France’s Aides à Finalité
Régionale, which relaxes rules governing the allocation of firm subsidies while
keeping their level constant. In response, policy makers re-allocate subsidies away
from research and development to mainly low-skilled manufacturing and service
sectors. It triggers a persistent improvement of employment, mainly through increased
low-skilled manufacturing employment and at the expense of R&D related
occupations. In the long term, though, labor income and productivity decrease. Finally,
at the individual level, workers employed in manufacturing at the time of
the treatment benefit on average of 2% higher hourly wage even 10 years after the
policy was lifted.

Note: 
Length: 33
Creation-Date: 2024-07
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp573
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_573