Effectiveness of Public Support

Abstract

In Chapters 1 to 3, the discussion focused mainly on the theoretical arguments in favour of and/or against public support to industry as well as on the instruments of support. The latter includes state aid, public procurements, strategic trade policy, provision of public goods, regulations, policies directed towards factor markets, and so forth. The arguments in favour of public support are related to information issues (imperfect information, uncertainty and information spillovers), externalities (network and spatial externalities), strategic trade and merger (incomplete markets, oligopolistic competition) and the new growth theories (in particular R&D issues). The arguments against public support put forward the conflict with other policies (competition, trade and macroeconomic policies), political economy issues (elections, lobbying and capture, corruption and favouritism) and the difficulties of choice of appropriate instruments.