Measuring the Extent of European State Aid Control: An Econometric Analysis of the European Commission Decisions

This paper provides an analysis of the European Commission (EC) decisions on state aid control using data on 550 state aid cases approved by the EC between 1998 and 2009. We measure the determinants of the duration of state aid, total budget of state aid and daily budget of state aid. By using these imperfect proxies, we try to identify the extent of European state aid control. Our results suggest that aid with multiple objectives to achieve has both longer durations and higher amounts of budget. We also find that for some aid objectives or industries, the EC approves cases of aid with both longer durations and higher levels of budget. On the other hand, for some class of aid objectives and industries, there is a trade-off between duration and the level of budget to counter-balance the undesired effects. The interpretation of the results implies that the European state aid control, which once was originally intended to address concerns about export subsidies and strategic trade, recently puts more emphasis on market failures mostly associated with externalities and public goods.

PDF

___

Bree, A. (2003), “The new EC regulation on state aid for employment”, European State Aid Law Quarterly, 1, 51-58.
Buts, C. & M. Jegers & T. Joris (2011), “Determinants of the European Commission’s state aid decisions”, Journal of Industry, Competition and Trade, 11, 399-426.
Cameron, A.C. & P.K. Trivedi (2009), Microeconometrics using Stata, Stata Press.
Carree, M. & A. Gunster & M.P. Schinkel (2010), “European antitrust policy 1957-2004: An analysis of commission decisions”, Review of Industrial Organization, 36, 97-131.
Chindooroy, R. & P. Muller & G. Notaro (2007), “Company survival following rescue and restructuring state aid”, European Journal of Law and Economics, 24, 165-186.
Cleves, M. & W. Gould & R.G. Gutierrez & Y.V. Marchenko (2008), “An introduction to survival analysis using Stata”, Stata Press.
Collie, D.R. (2000), “State aid in the European Union”, International Journal of Industrial Organization, 18, 867-884.
Collie, D.R. (2002), “Prohibiting state aid in an integrated market”, Journal of Industry, Competition and Trade, 2, 215–31.
Collie, D.R. (2005), “State aid to investment and R&D. European Economy”, Economic Papers, 231, 1–22.
Friederiszick, H.W. & D. Neven & L.H. Roller (2003), “Evaluation of the effectiveness of state aid as a policy instrument”, Report to DG ECFIN.
Friederiszick, H.W. & L.H. Roller & V. Verouden (2006), “European state aid control: an economic framework”, Handbook of Antitrust Economics, ed. Paolo Buccirossi, the MIT Press.
Garcia, J. & D. Neven (2005), “State aid and distortion of competition: A benchmark model”, Working Papers 06/2005, HEI.
Glowicka, E. (2008), “State aid and competition policy: the case of bailouts in the European Union”, PhD Dissertation, Humboldt University.
Heidhues, P. & R. Nitsche (2006), “Comments on state aid reform – some implications of an effects- based approach”, European State Aid Law Quarterly, 1, 23-34.
Jacquemin, A. & T. Nambu & I. Dewez (1981), “A dynamic analysis of export cartels: The Japanese case”, Economic Journal, 91, 685-696.
Kaplan, E.L. & P. Meier (1958), “Nonparametric estimation from incomplete observations”, Journal of the American Statistical Association, 53, 457-481.
Levenstein, M.C. & V.Y. Suslow (2006), “What determines cartel success?”, Journal of Economic Literature, 44, 43-95.
Marquez, J. (1994), “Life expectancy of international cartels: An empirical analysis”, Review of Industrial Organization, 9, 331-341.
Martin, S. & P. Valbonesi (2006), “The state aid game”, Discussion paper, Universita` di Padova.
Martin, S. & P. Valbonesi (2008), “Equilibrium state aid in integrating markets”, The B.E. Journal of Economic Analysis & Policy, 8, 1-37.
Mİllgaard, P. (2005), “Competitive effects of state aid in oligopoly”, Mimeo, Copenhagen Business School, Centre of Industrial Economics.
Nicolaides, P. (2003), “Competition and services of general economic interest in the EU: Reconciling economics and law”, European State Aid Law Quarterly, 2, 183-208.
Spector, D. (2006), “The economic analysis of state aid control”, Economic Analysis of State Aid Rules – Contributions and Limits, ed. Jacques Derenne & Massimo Merola, Proceedings of the Third Annual Conference of the Global Competition Law Centre, College of Europe.
Stöllinger, R. & M. Holzner (2016), “State aid and export competitiveness in the EU”, Journal of Industry, Competition and Trade, 1-34.
Suslow, V.Y. (2005), “Cartel contract duration: empirical evidence from inter-war international cartels”, Industrial and Corporate Change, 14, 705-744.
Van Cayseele, P. & J. Konings & I. Sergant (2014), “The effects of state aid on total factor productivity growth”, National Bank of Belgium Working Paper Series, No. 264.
Zşñiga‐Vicente, J.Á. & C. Alonso‐Borrego & F.J. Forcadell & J.I. Galán (2014), “Assessing the effect of public subsidies on firm R&D investment: a survey”, Journal of Economic Surveys, 28, 36-67.