Capital subsidies are usually adopted to overcome credit market imperfections and compensate for local external diseconomies common in backward areas. Such rationales usually holds stronger for small firms. This might mean that small firms benefit the most from business subsidy policies. Using a multiple regression discontinuity design we evaluate the effectiveness of the main Italian regional policy in the period 1996-2007 - the Law 488/92 (L. 488) - in achieving economic growth for firms of different sizes. We find that the impact of the subsidies on employment, investment, and turnover is positive and statistically significant for micro and small firms, while it is not statistically different from zero for medium and large firms. On the other side, the effect on productivity is negligible irrespective of the firms’ size. This might mean that are the smaller firms that really need the Government support to grow.
Keywords: Multiple regression discontinuity design, subsidies, policy evaluation, sample splits, Law 488/92, LATE