Does EU Public Support to Firm Investments Boost High Quality Jobs? Evidence from Linked Employer-Employee Microdata and Natural-Experiment Conditions

In this paper we estimate the impact on job quality of the direct support to firm- investment projects provided in Portugal through the EU structural funds. We use linked employer-employee microdata that cover the universe of Portuguese firms over the years 2000s, and we exploit the existence of natural experiment conditions in the form of exogenous treatment exclusions based on cut-offs in the ranking of the applicant firms. The analysis is performed through an exact matching procedure, combined with a difference-in-differences scheme, which is implemented separately for each of the successive cohorts of applicant firms to mimic a block-randomized pretest-posttest design. Our results indicate that the firm-level support co-funded by EU structural funds in Portugal has contributed to improving job quality compared to the counterfactual scenario of no public support, with each treated firm creating on average 4.9 additional standard-working-time jobs, 2.9 skilled jobs, and 2.0 permanent contract jobs. We also estimate that the average remuneration per hour in treated firms is €2.2 higher than in similar non-treated applicant firms. These results are robust to sensitivity analyses and bear some relevant policy implications for the EU.