Characteristics of Government Supported Firms

Governments all over the world grant different types of subsidies to firms which are said to have a lack-of-capital problem. However, it is unclear if governments have the information and motivation to target firms which have problems to finance profitable project via the private capital markets. Based on hypotheses derived from interest group theory, this paper compares (econometrically) characteristics of Swedish firms targeted for selective regional policy supports with randomly chosen non-supported firms. The results give some support for an interest group interpretation of the allocation of subsidies.