State-owned enterprises concentration in a given sector has a statistically significant negative effect on private fixed capital formation; the impact is stronger in those industries in which SOEs have a more dominant presence

You Are Suffocating Me! Firm-Level Evidence on Crowding Out. Serhan Cevik. IBM Working Paper No. 19/80, April 24, 2019. https://www.imf.org/en/Publications/WP/Issues/2019/04/24/You-Are-Suffocating-Me-Firm-Level-Evidence-on-Crowding-Out-46720

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.