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Effects of grants from EU funds on business performance of non-financial corporations in Croatia*
Matej Bule** 
Matej Bule
Affiliation: Croatian National Bank, Zagreb, Croatia
Correspondence
matej.bule@hnb.hr
Article | Year: 2021 | Pages: 177 - 207 | Volume: 45 | Issue: 2 Received: June 1, 2020 | Accepted: February 10, 2021 | Published online: June 6, 2021
|
FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
PDF
|
Indicator
|
Basic pattern
|
Extended pattern
|
|
Borderline effects
|
Standard error
|
Borderline effects
|
Standard error
|
|
Labour
productivity
|
0.076
|
(0.074)
|
0.044
|
(0.032)
|
|
TFP
|
0.009
|
(0.065)
|
0.017
|
(0.030)
|
|
Enterprise age
|
0.013***
|
(0.003)
|
0.004***
|
(0.001)
|
|
Employment rate
|
0.221***
|
(0.028)
|
0.186***
|
(0.014)
|
|
Capital
intensity
|
0.024**
|
(0.011)
|
0.022**
|
(0.003)
|
|
Indebtedness
rate
|
0.046***
|
(0.016)
|
0.045***
|
(0.007)
|
|
Average salary
|
0.093*
|
(0.057)
|
0.011
|
(0.016)
|
|
Profitability
|
0.078***
|
(0.022)
|
0.052***
|
(0.009)
|
|
Export
intensity
|
0.047***
|
(0.016)
|
0.023***
|
(0.007)
|
|
Import
intensity
|
-0.002
|
(0.019)
|
0.033***
|
(0.008)
|
|
Control
variables
year
|
Yes
|
Yes
|
|
NACE sector
|
Yes
|
Yes
|
|
region
|
Yes
|
Yes
|
|
Number of
corporate beneficiaries
|
227
|
1,643
|
|
Number of
observations
|
476,682
|
482,503
|
|
McFadden Pseudo
R2
|
0.3251
|
0.2665
|
Note: *, ** and *** mark statistical significance levels of 10%, 5% and 1% respectively. The basic pattern pertains to 227 corporate beneficiaries that received their first EU grant no later than 2016. These enterprises were used throughout the analysis. On the other hand, the extended pattern pertains to all corporate beneficiaries after sample adjustments, including those that received their first grant after 2016. Source: Authors’ own calculation based on data by the Ministry of Finance, Financial Agency and Court Registry.
|
Indicator
|
Period
|
Number of nearest neighbours
|
|
No caliper
|
Caliper (0.05)
|
|
1
|
5
|
1
|
5
|
|
Operating
income
|
t
|
0.213***
|
0.163**
|
0.319**
|
0.138***
|
|
t+1
|
0.173*
|
0.257**
|
0.290***
|
0.270***
|
|
t+2
|
0.286***
|
0.295***
|
0.236*
|
0.317***
|
|
Added value
|
t
|
0.167***
|
0.126***
|
0.141**
|
0.102***
|
|
t+1
|
0.213***
|
0.240***
|
0.311***
|
0.244***
|
|
t+2
|
0.332***
|
0.353***
|
0.388***
|
0.321***
|
|
Fixed assets
|
t
|
0.513***
|
0.502***
|
0.488***
|
0.516***
|
|
t+1
|
0.610***
|
0.659***
|
0.721***
|
0.679***
|
|
t+2
|
0.580***
|
0.658***
|
0.868***
|
0.636***
|
|
Employment rate
|
t
|
0.076***
|
0.069***
|
0.103***
|
0.080***
|
|
t+1
|
0.106***
|
0.129***
|
0.235***
|
0.167***
|
|
t+2
|
0.141***
|
0.180***
|
0.270***
|
0.201***
|
|
Labour
productivity
|
t
|
0.080*
|
0.050
|
0.031
|
0.014
|
|
t+1
|
0.094*
|
0.100**
|
0.054
|
0.061
|
|
t+2
|
0.175***
|
0.158***
|
0.098
|
0.103**
|
|
TFP
|
t
|
0.062
|
0.033
|
0.018
|
-0.002
|
|
t+1
|
0.059
|
0.084
|
0.092
|
0.072
|
|
t+2
|
0.160**
|
0.171***
|
0.161**
|
0.139***
|
|
Number of
treated observations
|
226
|
226
|
219
|
215
|
|
Number of
control observations
|
218
|
985
|
212
|
933
|
Note: *, ** and *** mark statistical reliability levels of 10%, 5% and 1% respectively. Statistical reliability was determined by means of a bootstrapping procedure with 500 repetitions. Source: authors’ own calculation based on data by the Ministry of Finance, Financial Agency and Court Registry.
|
Indicator
|
Period
|
Number of nearest neighbours
|
|
No caliper
|
Caliper (0.05)
|
|
1
|
5
|
1
|
5
|
|
Indebtedness
rate
|
t
|
0.156*
|
0.176***
|
0.179*
|
0.171**
|
|
t+1
|
0.267**
|
0.274***
|
0.324***
|
0.264***
|
|
t+2
|
0.334**
|
0.294***
|
0.300**
|
0.296***
|
|
Average salary
|
t
|
0.005
|
-0.008
|
0.008
|
-0.006
|
|
t+1
|
-0.026
|
-0.007
|
-0.022
|
-0.003
|
|
t+2
|
0.035
|
0.021
|
0.044*
|
0.029
|
|
Capital
intensity
|
t
|
0.539***
|
0.503***
|
0.444**
|
0.510***
|
|
t+1
|
0.567***
|
0.577***
|
0.547**
|
0.551***
|
|
t+2
|
0.476**
|
0.507***
|
0.657***
|
0.453**
|
|
Profitability
|
t
|
-0.034
|
-0.057
|
-0.081
|
-0.098
|
|
t+1
|
-0.143
|
-0.115
|
-0.197**
|
-0.214***
|
|
t+2
|
-0.136
|
-0.169*
|
-0.320***
|
-0.255***
|
|
Export
intensity
|
t
|
-0.084
|
-0.011
|
0.015
|
-0.004
|
|
t+1
|
-0.166*
|
-0.083
|
-0.037
|
-0.045
|
|
t+2
|
-0.161
|
-0.058
|
0.027
|
-0.007
|
|
Import
intensity
|
t
|
0.021
|
0.005
|
0.113
|
0.066
|
|
t+1
|
0.005
|
-0.003
|
0.168
|
0.074
|
|
t+2
|
0.094
|
0.131
|
0.191
|
0.159*
|
|
Number of
treated observations
|
226
|
226
|
219
|
215
|
|
Number of
control observations
|
218
|
985
|
212
|
933
|
Note: *, ** and *** mark statistical reliability levels of 10%, 5% and 1% respectively. Statistical reliability was determined by means of a bootstrapping procedure with 500 repetitions. Additional calculations with control samples comprising 2 and 10 nearest neighbours are provided in Appendix 4 below. Source: authors’ own calculation based on data by the Ministry of Finance, Financial Agency and Court Registry.
Note: *, ** and *** mark statistical reliability levels of 10%, 5% and 1% respectively. Statistical reliability was determined by means of a bootstrapping procedure with 500 repetitions. Additional calculations with control samples comprising 2 and 10 nearest neighbours are provided in Appendix 4 below. Source: authors’ own calculation based on data by the Ministry of Finance, Financial Agency and Court Registry.
Note: The solid black curve depicts the conditional expectation of growth rates of the indicator under observation with the provided relative intensity of treatment and estimated generalised propensity score. The shadowed sections represent the ceiling and floor values of the 95% confidence interval calculated through the bootstrapping method with 500 repetitions. Source: Authors’ own calculation based on data by the Ministry of Finance, Financial Agency and Court Registry.
Note: The solid black curve depicts the conditional expectation of growth rates of the indicator under observation with the provided relative intensity of treatment and estimated generalised propensity score. The shadowed sections represent the ceiling and floor values of the 95% confidence interval calculated through the bootstrapping method with 500 repetitions. Source: Authors’ own calculation based on data by the Ministry of Finance, Financial Agency and Court Registry.
|
Variable
name
|
Description
|
Note
|
|
Revenue
|
Real value of
operating income
|
Deflated by GDP
deflator
|
|
Employment rate
|
Total number of
employees based on hours of labour
|
-
|
|
Fixed assets
|
Real value of
fixed assets
|
Deflated by GDP
deflator
|
|
Age
|
Number of years
passed since the establishment of the enterprise
|
-
|
|
Added value
|
Difference
between operating income and value of intermediary inputs and other costs of
sold products
|
Deflated by
implicit added value deflators to the second digit level of the National
Classification of Activities (NKD) Energy costs have been deflated by the
implicit added value deflator for the electricity, gas, steam and air
conditioning supply sector.
|
|
Labour
productivity
|
Ratio between
added value and number of employees
|
-
|
|
Total factor
productivity
|
Residual of the
Cobb-Douglas production function
|
See Appendix 2
for more details on calculation methodology.
|
|
Capital
intensity
|
Ratio between
fixed assets and number of employees
|
-
|
|
Profitability
|
Ratio between
period profit and total assets
|
-
|
|
Indebtedness
rate
|
Ratio between
non-current liabilities and total commitments
|
-
|
|
Average salary
|
Ratio between
total gross employee costs and number of employees
|
Deflated by
implicit added value deflators to the second digit level of the National
Classification of Activities (NKD)
|
|
Export
intensity
|
Ratio between
revenue from sales abroad and operating income
|
-
|
|
Import
intensity
|
Ratio between
import value and operating income
|
-
|
|
Regional
affiliation
|
Divided into
five regions: Eastern Croatia, Central Croatia, Northern Croatia, Adriatic
Croatia and the City of Zagreb.
|
An enterprise’s
geographic affiliation is classified into regions, which have been defined on
the basis of the first version of the new NUTS-2 classification in Croatia
(Institute for Development and International Relations, 2018). This
classification is used here solely for analytical purposes.
|
uijzuh
|
Indicator
|
Before adjustments
|
Before merger
|
Number of nearest neighbours
|
|
No caliper
|
Caliper (0.05)
|
|
1
|
2
|
5
|
10
|
1
|
2
|
5
|
10
|
|
Labour
productivity
|
0.580***
|
0.729***
|
-0.042
|
0.000
|
-0.032
|
-0.036
|
-0.032
|
0.047
|
0.014
|
-0.010
|
|
Enterprise age
|
4.431***
|
6.573***
|
0.430
|
0.560
|
0.459
|
0.295
|
1.157
|
0.513
|
0.783
|
1.147*
|
|
Employment rate
|
1.530***
|
1.791***
|
-0.145
|
-0.075
|
-0.020
|
0.040
|
0.023
|
-0.050
|
0.084
|
0.209**
|
|
TFP
|
1.066***
|
1.168***
|
-0.053
|
-0.005
|
-0.030
|
-0.023
|
-0.130
|
-0.027
|
0.008
|
0.032
|
|
Capital
intensity
|
3.022***
|
3.790***
|
-0.123
|
0.005
|
-0.013
|
-0.016
|
-0.086
|
0.017
|
-0.019
|
0.032
|
|
Export
intensity
|
0.970***
|
1.515***
|
0.091
|
0.093
|
0.116
|
0.126
|
-0.101
|
0.174
|
0.154
|
0.220*
|
|
Indebtedness
rate
|
0.648***
|
0.955***
|
-0.063
|
-0.027
|
-0.044
|
-0.018
|
0.007
|
-0.095
|
-0.068
|
0.036
|
|
Number of
treated observations
|
1.921
|
226
|
226
|
226
|
226
|
226
|
219
|
219
|
215
|
213
|
|
Number of
control observations
|
772,528
|
441,846
|
218
|
417
|
985
|
1,787
|
212
|
411
|
933
|
1,694
|
Note: *, ** and *** mark statistical reliability levels of 10%, 5% and 1% respectively. Source: authors’ own calculation based on data by the Ministry of Finance, Financial Agency and Court Registry.
|
Indicator
|
Period
|
Number of nearest neighbours
|
|
No caliper
|
Caliper (0.05)
|
|
2
|
10
|
2
|
10
|
|
Operating
income
|
t
|
0.200***
|
0.182***
|
0.219**
|
0.210**
|
|
t+1
|
0.300**
|
0.309***
|
0.288***
|
0.292***
|
|
t+2
|
0.328***
|
0.324***
|
0.308***
|
0.346***
|
|
Added value
|
t
|
0.148***
|
0.134***
|
0.125**
|
0.129***
|
|
t+1
|
0.248***
|
0.256***
|
0.227***
|
0.256***
|
|
t+2
|
0.328***
|
0.375***
|
0.326***
|
0.364***
|
|
Fixed assets
|
t
|
0.506***
|
0.482***
|
0.470***
|
0.465***
|
|
t+1
|
0.632***
|
0.695***
|
0.735***
|
0.748***
|
|
t+2
|
0.582***
|
0.709***
|
0.709***
|
0.722***
|
|
Employment rate
|
t
|
0.073***
|
0.071***
|
0.080***
|
0.081***
|
|
t+1
|
0.123***
|
0.142***
|
0.166***
|
0.160***
|
|
t+2
|
0.187***
|
0.184***
|
0.220***
|
0.202***
|
|
Labour
productivity
|
t
|
0.067
|
0.055
|
0.032
|
0.041
|
|
t+1
|
0.113*
|
0.100**
|
0.045
|
0.083*
|
|
t+2
|
0.123**
|
0.175***
|
0.087*
|
0.149***
|
|
TFP
|
t
|
0.057
|
0.039
|
0.026
|
0.024
|
|
t+1
|
0.109*
|
0.089*
|
0.046
|
0.081*
|
|
t+2
|
0.147***
|
0.189***
|
0.112**
|
0.169***
|
|
Indebtedness
rate
|
t
|
0.189**
|
0.200***
|
0.165**
|
0.200***
|
|
t+1
|
0.348***
|
0.287***
|
0.317***
|
0.301***
|
|
t+2
|
0.336***
|
0.289***
|
0.277**
|
0.297***
|
|
Average salary
|
t
|
-0.003
|
0.005
|
-0.002
|
0.009
|
|
t+1
|
0.016
|
-0.003
|
0.019
|
0.001
|
|
t+2
|
0.014
|
0.029
|
0.023
|
0.042
|
|
Capital
intensity
|
t
|
0.511***
|
0.474***
|
0.432***
|
0.457***
|
|
t+1
|
0.557***
|
0.603***
|
0.620***
|
0.660***
|
|
t+2
|
0.416***
|
0.571***
|
0.541***
|
0.585***
|
|
Profitability
|
t
|
-0.028
|
-0.052
|
-0.083
|
-0.105
|
|
t+1
|
-0.101
|
-0.130*
|
-0.145*
|
-0.183**
|
|
t+2
|
-0.178*
|
-0.192**
|
-0.214**
|
-0.259***
|
|
Export
intensity
|
t
|
-0.024
|
-0.010
|
-0.018
|
0.013
|
|
t+1
|
-0.079
|
-0.079
|
-0.096
|
-0.055
|
|
t+2
|
-0.102
|
-0.071
|
-0.089
|
-0.001
|
|
Import
intensity
|
t
|
0.025
|
0.026
|
0.052
|
0.022
|
|
t+1
|
0.021
|
0.052
|
-0.001
|
0.034
|
|
t+2
|
0.163
|
0.121
|
0.075
|
0.128
|
|
Number of
treated observations
|
226
|
226
|
219
|
213
|
|
Number of
control observations
|
417
|
1,787
|
411
|
1,694
|
Note: *, ** and *** mark statistical reliability levels of 10%, 5% and 1% respectively. Statistical reliability was determined by means of a bootstrapping procedure with 500 repetitions. Source: authors’ own calculation based on data by the Ministry of Finance, Financial Agency and Court Registry.
|
Indicator
|
Coefficient
|
Standard error
|
|
Employment rate
|
-0.495***
|
0.085
|
|
Capital
intensity
|
-0.074**
|
0.031
|
|
Labour
productivity
|
-0.191**
|
0.085
|
|
TFP
|
7.69E-10
|
5.38E-10
|
|
Age
|
0.095
|
0.121
|
|
Export
intensity
|
0.016
|
0.054
|
|
Indebtedness
rate
|
0.148***
|
0.052
|
|
Number of
observations
|
217
|
Note: *, ** and *** mark statistical reliability levels of 10%, 5% and 1% respectively. Statistical reliability was determined by means of a bootstrapping procedure with 500 repetitions. Source: authors’ own calculation based on data by the Ministry of Finance, Financial Agency and Court Registry.
Table 1Results of probit model DISPLAY Table
Table 2Results of the analysis of selected indicators by applying the difference in differences method DISPLAY Table
Table 3Results of the analysis of selected indicators by applying the difference in differences method DISPLAY Table
Figure 1Estimate of the relationship between grant size and impact level on trends in operating income (left) and total employment rate (right) DISPLAY Figure
Figure 2Estimate of the relationship between grant size and impact level on trends in corporate beneficiaries’ capital intensity (left) and indebtedness levels (right) DISPLAY Figure
Figure 3Estimate of the relationship between grant size and impact level on trends in total factor productivity (left) and labour productivity (right) DISPLAY Figure
Table A1List of variables used in the analysis DISPLAY Table
Table A3Arithmetic mean differences between enterprises in the treated and control groups DISPLAY Table
Table A4Analysis results for selected business performance indicators through the difference in differences method with control group of 2 and 10 nearest neighbours DISPLAY Table
Table A5Generalised propensity score (GPS) estimates DISPLAY Table
* The article was submitted for the 2020 annual award of the Prof. Dr. Marijan Hanžeković Prize.
** All views presented in this paper are the authors’ own and do not necessarily reflect the official position of the Croatian National Bank. The authors would like to thank two anonymous reviewers and colleagues from the Croatian National Bank for their useful suggestions.
|
|
June, 2021
II/2021 |
