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Counterfactual impact evaluation

Counterfactual impact evaluation. What it tells us… and what it doesn't Daniel Mouqué DG Regional Policy, European Commission. Reminder: Counterfactual = comparison. In practice, comparison group. This imposes conditions…. Similar intervention over large "n" (law of large numbers).

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Counterfactual impact evaluation

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  1. Counterfactual impact evaluation What it tells us… and what it doesn't Daniel Mouqué DG Regional Policy, European Commission

  2. Reminder:Counterfactual = comparison

  3. In practice, comparison group

  4. This imposes conditions… • Similar intervention over large "n" • (law of large numbers)

  5. … which only hold for certain measures • Interventions which target individuals or enterprises • Not infrastructures (exception: impact of infrastructures on individuals) • Perhaps for area based initiatives (provided similar goals/means)

  6. There are also data needs • Good data on the intervention (nature, scale, dates) • Good data on target indicators (before and after, including for non-beneficiaries) • The ability to link 1 and 2

  7. Lessons learned from enterprise support studies • DG Regional Policy doing & encouraging since 2008 • What are we learning? And what would we like to know? In terms of: • Investment, capital constraints and other market failures (and how vary by firm and support size) • Impact of support on the enterprise (productivity, innovation, employment)

  8. What do we learn… … about investment, capital constraints and other market failures?

  9. Impact on investment in Eastern Germany (GEFRA 2010)

  10. E. Germany not an isolated example

  11. Small is beautiful 1 – the firms

  12. Small is beautiful 2 – the support • ASVAPP (2012) even controlling for firm size, smaller grants more effective (cpj €79,000 for smallest grants, rising to €489,000 for largest). • ASVAPP (2012) outright grant to SMEs similar effect to soft loan of same size • Czarnitzki et al (2011) presence or absence of a grant was the crucial factor - smallest grants had almost the same innovation impact as the largest • Comparing across studies: schemes of smaller support tended to have better results (eg RSA, UK)

  13. Business advice can be cost effective • Better survival rates 2-4 years later in North Jutland. • €7500/net firm €1500/net job • (Rotger and Gørtz, 2009)

  14. What do we learn? • Capital rationed for SMEs, but only partially • Grants help – do not substitute private money • This argument applies to small enterprises and (probably) to medium sized but not large firms • Less support and/or financial instruments would still work • Capital constraints not the only market failure: success of advice => information failures more serious, at least for smallest and newest firms?

  15. What would we like to know? • The mechanism for capital constraints? Knowing this would help for… • Targetting by firm? And what too big for support? • More effective solutions than direct financial support? (E.g. change capital market) • What is the optimal level and form of support? • What information failures? • Whatis good soft support (incl. business advice)? • How to target/tailorby context and firm? => Need more CFsandother types of evaluation

  16. What do we learn… … about impacts on the firm? Productivity, innovation & jobs

  17. Broader more often than deeper

  18. A closer look at some exceptions • CEBR (2010) in DK: innovation consortia increased profitability 12% vs controls over a 10 year period (adds up to €260,000 extra profits per firm). • Czarnitzki (2007): R&D subsidies in Germany had a significant effect on research and innovation where the firm also benefitted from networking • Czarnitzki (2007): in Finland both financial R&D support and networking effective, and additive

  19. CIS indics, Germany (Czarnitzki, 2011)

  20. But innovation is not a panacea • GEFRA (2010) investment impact of R&D grants < modernisation grants (leverage 0.9-1.0 vs 1.4-1.5). Innovation benefits worth loss in impact? • De Blasio, Fantino & Pellegrini (2009) No additional impact from investment scheme: less tangible nature => more possibilities for deadweight

  21. Jobs created, but < monitoring data

  22. Job quality good • ASVAPP (2012) average firm salary and productivity same or slightly greater • Trzciński (2011) jobs created in SMEs received similar pay rises to those in the control group – and that jobs were maintained five years after support.

  23. What do we learn? • Relatively easy to make firms proportionately bigger (e.g. with grants) • More difficult to make firms more innovative/productive (soft support better?) • Measures with less tangible targets eg innovation can be abused (maybe we knew this already?)

  24. What is left unanswered? And how would we answer this? • Is soft support really the key to innovation? • What is the mechanism for productivity and innovation? What types of innovation influenceable, how to target by firm etc? • What constitutes a "smart" supportpackage? What soft support, what mix with financial support? • How to avoid abuseof innovation and networking measures? => Need more CFsandother types of evaluation

  25. In conclusion …

  26. In summary • New lessons from CFs about impacts (partial capital constraints for SMEs, scaling up effect, importance of information failure) • More to learn about impacts from CFs (e.g. soft support, financial instruments) • Need other evaluation methods to open "black box" of mechanisms (targetting most effective solutions, best investments) • Some factors too intangible for quantified approach? (innovation)

  27. Beware the man whose only tool is a hammer… • … for every problem comes to resemble a nail • - Abraham Maslow

  28. For further information InfoRegio:ec.europa.eu/inforegio Impact evaluation centre:http://ec.europa.eu/regional_policy/information/evaluations/guidance_en.cfm#2

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