Public Ownership and the Local Economy

Abstract

We find that a firm’s transition from private to public ownership stunts local economic growth, especially in poorer areas. After accounting for the endogenous decision to go public, areas hosting companies that go public experience muted growth in employment, establishments, population, and wages, relative to areas where firms file to go public and remain private. Establishment level analyses reveal that transitioning to public ownership causes firms to geographically diversify their establishments and employee base. These findings are consistent with public ownership reducing a firm’s reliance on local agglomeration economies, to the detriment of the local community.

Keywords: IPO, Economic Growth

JEL Classification: G38, J61, J21, G30, G32