The aim of the article is to describe theoretical concepts related to the effects of state subsidies on enterprises and to discuss the magnitude and effect of state aid on enterprises during the transformation of the Czech economy. Subsidies to enterprises during transformation were high, often transparent, and above the European Union average. During 1997-2003 registered state aid reached 362 bn. CZK. More than 90 percent of the total registered state aid went to awards the rescue and restructuring of enterprises. It can be roughly estimated that during 1997-2000 state aid was twice as high as officially registered. Share of state aid to enterprises in public debt increased and reached 70 percent by 2003. Non-transparent channels of state aid distribution decrease the efficiency of state aid, as they distort market signals and decrease motivation for fair competition.
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