Irene Ferrari (Marche Polytechnic University)
Domenico Depalo, Salvatore Lattanzio, Alessandro Palma, Caterina Pavese and Vincenzo Scrutinio
This paper examines the causal effects of targeted firm subsidies aimed at improving workplace health and safety, an understudied dimension of industrial policy. We analyze Italys INAIL ISI Calls programthe largest global initiative of its kindwhich subsidizes firms investments in safer and more advanced capital equipment. Using matched employer-employee administrative data on the universe of applicant firms between 2011 and 2019, we exploit quasi-random variation generated by click day allocation rules: applications are submitted electronically and processed on a first-come, first-served basis until funds are exhausted. We implement a stacked difference-in-differences design comparing firms that narrowly receive funding to those that narrowly miss it to identify the impact of funding on firm performance and worker outcomes. We document sizable effects. Tangible capital increases by 15% in the treatment year and remains 7% higher four years later, while employment rises by 3% over the same horizon. Profits per worker also increase whereas we find no statistically significant effects on productivity. Overall, the evidence indicates that these subsidies primarily operate through firm expansion and cost savings, rather than productivity gains or improvements in measured efficiency.