Author(s): Veljko Bojovic, Filip Obradovic
Title: Efficiency Analysis of Subsidies for Investments using Stochastic Frontier Analysis: Case of Serbia
Source: International Scientific Days 2018 :: Towards Productive, Sustainable and Resilient Global Agriculture and Food Systems :: Proceedings
ISBN: 978-80-7598-180-6
DOI: https://doi.org/10.15414/isd2018.aeu.03
Publisher: Wolters Kluwer ČR, Prague
PY, pages: 2018, 2546-2566
Published on-line: 2018-11-09
Language: eng
Abstract: Historically, a great number of countries worldwide used subsidies in order to promote
or protect specific economic sector. With the process of globalization, Governments
also began utilizing subsidies with the intent of attracting foreign direct investments.
This practice has remained until today, when many countries, including
Serbia, still use subsidies and other instruments (e.g. tax incentives) in order to encourage
both foreign and domestic investments, increase employment and accelerate
regional and technological development. Challenges and questions about optimal
institutional design, minimal criteria that investors have to fulfill, optimal level of
subsidies remain the same.
Bearing in mind the increase in expenditures on this type of subsidy in Serbia,
there is a need to assess the efficiency of this policy. In this paper, it is done using
stochastic frontier analysis (SFA). To the extent of the authors’ knowledge, this is
the first paper in which stochastic frontier analysis is implemented in an attempt to
capture inefficiencies of subsidizing policy. The results show that there were potential
budget savings that could have been achieved. In other words, there were some investment
projects that were overpaid by the Government of Serbia. In addition, we
believe that framework established in this paper could be used as a guide for future
policy practice. In the end, suggestions are given for further research which would
give broader and more precise results.
Keywords: subsidies, state aid, FDI, efficiency analysis, stochastic frontier analysis
JEL Classification: F21, F23,H25, C21, C51
Rights:Open Access :: Creative Commons BY-NC-SA 4.0 International Licence
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