We test for the role of state aid as a driver of digital competitiveness at the industry level, focusing on the digital factor content of trade in a sample of European countries. Results show that state aid can increase digital competitiveness, particularly in R&D-intensive industries and in relation to the export of (digital) capital-intensive goods and services. Interestingly, aggregate state aid appears to be more effective than specific R&D funds in explaining the performance of country-industries in foreign markets, highlighting the importance of prior adequate structural conditions for the latter effect to materialize.
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Castelli et al. (2024) studied this question.
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