State Aid Policy in the European Union

Abstract

Industrial policy is an important tool of economic policy-making, and this has been the case especially since the onset of the current global financial crisis in 2008. However, only relatively few empirical studies consider the macroeconomic effects of industrial policy, especially for European Union countries. In this study we investigate the effect of state aid policy on economic growth and investment, using a panel data set which covers 27 European Union countries over the period 1992-2011. Our results suggest that state aid policy is not an effective tool to achieve higher economic growth and investment rates.