How Government Grants Create Zombie Businesses

The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending · Jul 17, 2026 · 8m · transcript

Governments around the world hand out hundreds of billions in grants each year. But a growing body of research shows these grants often keep unviable businesses alive, distorting markets and wasting taxpayer money. Lucas and Luna examine the case of Canada's Industrial Research Assistance Program, where 40% of grant-receiving firms would have failed without the subsidy, surviving for years as 'zombies' with lower productivity and no innovation. They also look at similar patterns in European Union structural funds and US Small Business Innovation Research grants. The episode…