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

16 Pages Posted: 2 Jun 2019

See all articles by Serhan Cevik

Serhan Cevik

International Monetary Fund (IMF)

Date Written: April 2019


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.

Keywords: Economic growth, Private investments, Capital formation, Foreign investment, Public investments, Fixed investment, state-owned enterprises, crowding-out effect, firm-level analysis, SOEs, private fixed investment, given sector, market concentration, SOE

JEL Classification: E22, E62, F12, F14, E01, L31, G3, O4

Suggested Citation

Cevik, Serhan, You are Suffocating Me! Firm-Level Evidence on Crowding Out (April 2019). IMF Working Paper No. 19/80, Available at SSRN:

Serhan Cevik (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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