When Do State-Owned Firms Crowd Out Private Investment?

Stefan Buehler and Simon Wey ()

Journal of Industry, Competition and Trade, 2014, vol. 14, issue 3, 319-330

Abstract: This paper examines the conditions under which a state-owned firm with a political agenda strategically crowds out investment by a private firm. Employing reduced-form analysis, we show that strategic crowding out occurs if (i) the private firm regards investments as strategic substitutes, and (ii) private investment is undesirable from the state-owned firm’s perspective. We discuss how our analysis applies to real-world markets and argue that it provides an explanation for the ambivalent evidence on the effect of public on private investment: State ownership is neither necessary nor sufficient for crowding out to occur. Copyright Springer Science+Business Media New York 2014

Keywords: Public investment; Crowding out; Political agenda; D43; H42; L13 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10842-013-0164-y

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