An impact evaluation of the Micro Invest Scheme : a counterfactual approach

Abstract

The aim of this dissertation is to evaluate the impact of the Micro Invest (MI) Scheme on the performance of beneficiaries. The MI Scheme is an incentive which allows small firms to benefit from tax credits on eligible expenditure, thereby encouraging them to invest, innovate and grow. The dissertation attempts to answer two main questions, the first is whether the MI Scheme produced the intended results and if so, for whom and under what conditions, and the second is the extent to which the MI Scheme has been efficient in achieving its objectives. This research is motivated by the fact that while it is recognised that policies which support the development of small firms are crucial for the economy to grow and be competitive, the effectiveness and impact of such support policy measures are often debated. The key conclusions of this paper are as follows: First, the counterfactual approach is found to provide more accurate impact estimates. Furthermore, the use of mixed methods maximises the credibility of the research findings. Second, the scaling up of the MI Scheme is estimated to have led to an average increase of almost one job per beneficiary and an additional investment of around €32,000 per enterprise. Nonetheless, an estimate for deadweight of 55% suggests that higher efforts are required to increase the additionality of the incentive. Third, the incentive has not given rise to any significant differing impacts between different firm sizes. In contrast, the probability of ‘zero’ deadweight is estimated to be 23% higher for the average firm in the retail or services sector relative to the average manufacturing firm. Fourth, the cost per job created is estimated at €53,000 whereas the cost per extra euro of investment is around €1.50. Finally, the positive results are expected to be sustainable, which notion is supported by the fact that this measure has been in existence since 2010 and has been upscaled twice since its inception.