THE IMPACT OF GOVERNMENT FINANCIAL INCENTIVES ON FIRM PERFORMANCE: EVIDENCE FROM TURKISH FIRMS

Abstract

This study investigates the causal impact of government financial incentives on labor productivity and export performance of Turkish firms using data from the World Bank Enterprise Survey. The empirical analysis employs the Propensity Score Matching approach to control for counterfactual outcomes. The study finds that firms receiving government financial incentives are 33% more productive and export five times more than those that do not. The findings suggest that it is essential to continue supporting firms to foster their performance, particularly small and younger firms. The study contributes to the literature by examining the relationship between government incentives and firm performance in a developing country context. The use of PSM as an impact evaluation method addresses identification concerns and selection bias. The study's findings have significant implications for policymakers and suggest that financial incentives to firms are a viable policy option for improving productivity and achieving economic growth