You Are Suffocating Me! Firm-Level Evidence on Crowding Out
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Summary:
Literature on whether government spending crowds out or crowds in the private sector is large, but still without an unambiguous conclusion. Using firm-level data from Ukraine, this paper provides a granular empirical investigation to disentangle the impact of state-owned enterprises (SOEs) on private firm investment in Ukraine—a large transition economy. Controlling for firm characteristics and systematic differences across sectors, the results indicate that the SOE concentration in a given sector has a statistically significant negative effect on private fixed capital formation, and that the impact of SOEs is stronger in those industries in which SOEs have a more dominant presence. These findings imply that private firms operating in sectors with a high level of SOE concentration invest systematically less than businesses that are not competing directly with SOEs.
Series:
Working Paper No. 2019/080
Subject:
Economic sectors Expenditure Government debt management National accounts Private investment Public enterprises Public financial management (PFM) Revenue sharing Taxes
English
Publication Date:
April 24, 2019
ISBN/ISSN:
9781498311090/1018-5941
Stock No:
WPIEA2019080
Pages:
15
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