Governments influence firm' behavior not only via public provision of goods and services or public consumption but also through taxes, subsidies and regulation.  Among the reasons for these governmental activities are dissatisfaction with certain firm activities (e.g. pollution) and an interest in encouraging other activities (e.g. R&D), concerns about market power and collusive firm behavior, market failures and the influence of interest groups. 

One special type of government activity is the provision of capital in the form of grants, loans with interest rates below market rates, loan guarantees etc. In order to support research and development activities as well as small and medium-sized firms R&D programs and SME programs are set up.  In the European Union these programs have to be notified and they have gained considerable importance during the last decade.  We are particularly interested in the effects of such programs on the performance of the supported firms as well as on market outcomes.  In empirical studies we investigate how state aid policies depend on characteristics of political regimes.  A second type of state aid regulated on the EU level is support for firms in trouble through rescue and restructuring subsidies.  We study the determinants and effects of this type of intervention for firms and markets. We are also interested in externalities of subsidies in welfare distribution.