You Are Suffocating Me! Firm-Level Evidence on Crowding Out

Author/Editor:

Serhan Cevik

Publication Date:

April 24, 2019

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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. 19/80

Subject:

English

Publication Date:

April 24, 2019

ISBN/ISSN:

9781498311090/1018-5941

Stock No:

WPIEA2019080

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

15

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