The Effect of ‘State Aid’ on Market Shares: An Empirical Investigation in an EU Member State

This paper empirically investigates the impact of fixed asset subsidies to firms on market shares. By means of a tobit regression on a sample of over 13 000 Belgian firms we find a significant and positive joint influence of all fixed asset subsidies on market shares, acknowledging that this is not the objective of the subsidies. This effect only becomes visible 2 years after the subsidy has been granted. Apparently, even under the current European legislation with regard to State aid, having as one of its aims to prevent distortion of competition, giving subsidies to firms for a variety of reasons still impacts on market shares and hence may not go without consequences for competition. Copyright Springer Science+Business Media New York 2013