Importance The article is an attempt to measure the effect of government subsidies on the activity of small entrepreneurship. Objectives The research provides a quantitative assessment of the way small businesses depend on the amount of government subsidies. Methods The research compares information on the amount of subsidies granted for the small entrepreneurship development and its development indicators by constituent entity of the Russian Federation within 2008 through 2014. The modeling is based on double logarithmic regressions in line with fixed effects. For specification purposes, indicators without a time lag and with one-year lag are used. Results We identify a statistically significant impact of government subsidies and their amount on small business indicators in regions. Indicators range if the amount of public funds changes by one percent. The greatest effect is registered in a year after the funds were provided. Conclusions and Relevance Government subsidies have a positive effect on the small business development in the Russian Federation. If such funding grows, it will reinforce the position of small businesses in the national economy. The findings can be used to choose options for governmental support to small entrepreneurship in Russia and allocate funds among the constituent entities.
Keywords: government subsidy, small business, budget, fixed effect model, random effect model, double logarithmic regression
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