Visiting Lecturer on Finance,
Budapest Business School
Published in: Public Finance Quarterly 2017/1 (p. 39-49.)
SUMMARY: Despite being one of the leaders in the absorption of EU grants, the catch-up performance of Hungary has been poorer than that of the other Member States joining the EU in 2004 and 2007. Among the possible causes, this article attempts to take a closer look at the effects of direct aid to companies, proposing an argument that also draws on the results of multivariate regression analysis carried out on a proprietary database. The effect of aid on companies is partly manifested in a moderate degree of monopolisation in domestic markets. The international competitiveness of companies fails to improve, and increased employment is accompanied by deteriorating productivity in the short term. In modern development approaches, to ensure that aid to companies produces a sufficient catch-up effect, improvements are needed in research, development and innovation, and in the quality of human resources, and highly efficient support needs to be provided for infrastructure development.
KEYWORDS: EU, aid to companies, catching up, convergence, rent seeking, Hungary
JEL CODES: H25, H32