A propensity score analysis of public incentives: The Italian case

Public support to firms has been a traditional and important industrial policy measure in many countries for several decades. One of the reasons for public intervention is the existence of market failures or imperfections. Informational asymmetries between borrowers and lenders of funds in particular are used to justify subsidies to firms, especially small and medium-sized enterprises. Within this framework, the main purpose of public subsidies is offsetting market imperfections. This paper makes a contribution to current empirical literature by examining the effects of public funding on credit rationing of small and medium-sized Italian firms. The results suggest that public subsidies reduce the probability of a firm being credit rationing