Investment incentives as instrument of motivation of firms and economic stabilization

Abstract

Investment incentives are mostly presented as an efficient tool of economic policy to eliminate negative impacts of economic cycle and also as the tools of motivation of firms to generation of investment. The aim of the paper is to verify the relationship between investment incentives and business cycle in the Czech Republic. There is used the data of CzechInvest, Czech Statistical Office and Organisation for Economic Cooperation and Development. To verify the link between the investment incentives and the business cycle, the Pearson correlation coefficient and Spearman correlation coefficient was used. There has been identified moderate positive relationship between the volume of the state support and the growth of the gross domestic product in constant prices. The link between investment incentives and output gap was not statistically significant. The study brings new insights on the field of investment incentives as an instrument of stabilization of economy. Investment incentives are important in terms of stimulating the investment activity of firms. Findings of the study answer the question of whether the government behaves responsibly in the area of investment incentives. The findings show that the policy of investment incentives does not respond flexibly to the current needs of the Czech economy.

Subsidies and Economic and Financial Performance of Enterprises

“…Different driving factors can explain dynamics and market selection processes of enterprises Xavier 2004, 2007) and strategies of their survival (Bojnec and Knific 2021), economic and financial performances of enterprises, such as corporate governance (Bhagat and Bolton 2008;Koji et al 2020), state aid, the effectiveness of investment incentives (Cedidlová 2013;Fabuš and Csabay 2018;Musil and Hedija 2020), a macro-economic enabling environment with greater economic freedom, investment cost subsidy, and tax reduction incentives for investment that enhance the increases in inflow of FDI (Sambharya and Rasheed 2015;Munongo et al 2017;Tian 2018), and the availability of working capital and its management (Akgun and Karatas 2021;Anton and Nucu 2021).…”

Direct and Indirect Effects of Investment Incentives in Slovakia

“…The estimation results obtained by Yanikkaya and Karaboga (2017) showed that investment incentives had a negative or, at best, no positive effect on the selected macroeconomic variables. Although Musil and Hedija (2020)-only on a basis of a correlation analysisdemonstrated a statistically significant positive relationship between investment incentives and GDP growth, they also pointed to a non-statistically significant relationship between investment incentives and the output gap. Thus, they generally concluded that the investment promotion policy did not react flexibly to the current needs of the Czech economy.…”

Regional unemployment and investment incentives in Czechia

“…Hlaváček and Janáček (2019) researched various impacts of foreign investment and investment incentives on socio-economic development in Czechia, including that FDI and investment incentives are considered positive for a regionʼs economic growth. Musil and Hedija (2020) analysed the relationship between investment incentives and the economic cycle and determined that investment incentives are pro-cyclic. Similarly, Dinga (2011) examined the impact of investment incentives on the location of direct foreign investment in Czechia in 2001 -2007.…”