Additionality is one of the key principles driving the functioning of the EU cohesion
policies (ECP). The present paper studies how additionality affects the impact of firm-level
investment support on firm investment behaviour in differently competitive markets. We find that
the investment additionality and the level of competition importantly affect the firm investment
behaviour. Imposing additionality on the ECP investments in perfectly competitive markets
causes distortions in the capital market and leads to lower welfare levels. In contrast, without the
enforcement of additionality, the distortions are zero and the investment support fully benefits the
firms. In an imperfectly competitive environment, the firm-level investment support may increase
investment and may be welfare increasing with and without the enforcement of the investment
additionality.
BRANDSMA Andries;
KANCS D'Artis;
CIAIAN Pavel;
2013-10-24
ROUTLEDGE JOURNALS
JRC74752
0965-4313,
http://www.tandfonline.com/doi/full/10.1080/09654313.2012.722928,
https://publications.jrc.ec.europa.eu/repository/handle/JRC74752,
10.1080/09654313.2012.722928,
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