| Publication Type | | Preprints |
| Author | | Christa Hainz, Hendrik Hakenes |
| Year of Publication | | 2008 |
| Issue | | 2008/01 |
| Abstract | | Should the European Union grant state aid through an institution like the European Investment bank? This paper evaluates the efficiency of different measures for grant-ing state aid. We use a theoretical model with firms that differ in their creditworthiness and compare different types of subsidies with indirect subsidization through public banks. We find that, in a large parameter range, the politician prefers public banks to direct subsidies because they avoid windfall gains to entrepreneurs and they econo-mize on screening costs. For similar reasons, they may increase social welfare rela-tive to subsidies. One important prerequisite for this result is that public banks must not be allowed to fully compete with private banks. However, from a welfare perspec-tive, a politician uses public banks inefficiently often. |
| Publisher | | Max Planck Institute for Research on Collective Goods |
| Place Published | | Bonn |
| Export | | Tagged BibTex XML |
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| Supplementary Material | | |
| Keywords | | governance, Public bank, development bank, state aid, subsidies |
| JEL-Codes | | G21, G38, H25 |
