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On the Longer-Term Effects of State Aid on Market Shares

Patricia Coppens, Katharina Hilken, Caroline Buts

This article discusses the effect of State aid on competition covering a 6-year horizon. Subsidies have a positive effect on market shares within a 2-year time frame, as documented earlier by Buts and Jegers. While one would suppose the effect to diminish over time, we find that the opposite is true. Even after six years, subsidies still have a positive influence on market shares. Taking total subsidies over 6 years into account, market shares are significantly impacted which suggests that competition might be distorted. Up until recently, European State aid control focused on the ex ante evaluation of proposed measures. This article emphasizes the importance of ex post evaluations, studying multiple indicators (positive as well as negative effects of the aid) and especially covering a longer term horizon. Although first effects show after 2 years, the changes in market shares increase and therefore additional evaluations regarding the distortion of competition are useful at different points in time.
Keywords: subsidies; competition; market shares

Patricia Coppens finished her Master of Science in Management at the Vrije Universiteit Brussel and is now pursuing a Master of Finance and Investment at the Rotterdam School of Management. Katharina Hilken is a postdoctoral research fellow at the Department of Applied Economics of the Vrije Universiteit Brussel. Caroline Buts is assistant professor at the Department of Applied Economics of the Vrije Universiteit Brussel and a postdoctoral research fellow of the Research Foundation Flanders (FWO). Corresponding author: Caroline Buts (;Suggestions made by Michael Honoré and Emma Linklater are gratefully acknowledged.


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