TY  - JOUR
AU  - Bregman,Arie
AU  - Fuss,Melvyn
AU  - Regev,Haim
TI  - The Effects of Capital Subsidization on Israeli Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6788
PY  - 1998
Y2  - November 1998
UR  - http://www.nber.org/papers/w6788
L1  - http://www.nber.org/papers/w6788.pdf
N1  - Author contact info:
Melvyn A. Fuss
Department of Economics
University of Toronto
150 Saint George Street
Toronto, ON  M5S 3G7  CANADA
Tel: 416/978-1494
Fax: 416/978-6713
E-Mail: FUSS@CHASS.UTORONTO.CA

Haim Regev
National Institute of Statistics
Israel
E-Mail: h_regev@012.net.il
AB  - An industrial policy of subsidizing physical capital investment has been utilized in many countries in order to encourage export growth and spread economic development to outlying areas.   For Israel, we possess a unique time series-cross section micro data set that details investment and its associated subsidies by vintage at the level of the individual enterprise for 620 firms. These data provide the means by which an empirical analysis of the effects of the policy of subsidizing capital can be undertaken.  We estimate that, for the years 1990-94, this policy has resulted in production inefficiencies ranging from 5% for firms that receive the average level of subsidies to 15% for heavily subsidized firms.  We also document the fact that much of the subsidization appears not to have been necessary, in the sense that subsidized firms generally have earned higher rates of return on their total physical capital (including that portion which was subsidized) than firms that were not subsidized.
ER  -