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State-owned enterprises in Europe: Firm performance and aggregate effects

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  • Merlevede, Bruno
  • Muylle, Pablo

Abstract

Since the late 2000s, shocks and crises of various types have led to a revival of state intervention around the world. This paper builds a large firm-level dataset to analyze state ownership of firms in Europe for the period 2002–18. We confirm the underperformance of state-owned enterprises (SOEs) relative to privately-owned enterprises (POEs) found in earlier literature for this recent period for a range of firm-level performance indicators. We also examine the impact of SOEs on POEs. We find that larger SOE presence in an industry is associated with lower productivity growth and lower productivity levels among private firms in that industry, but does not negatively affect industry dynamics in terms of entry and exit. This suggests potential aggregate productivity gains from reallocating resources from SOEs to POEs. Further, we show that employment is more stable and crisis-resistant at SOEs, and that SOEs are a more stable source of downstream input demand for other firms. Leveraging our dataset’s cross-country nature, we find that SOEs are complements to, rather than substitutes for, lower quality institutions.

Suggested Citation

  • Merlevede, Bruno & Muylle, Pablo, 2026. "State-owned enterprises in Europe: Firm performance and aggregate effects," Journal of Comparative Economics, Elsevier, vol. 54(3), pages 749-768.
    • Handle: RePEc:eee:jcecon:v:54:y:2026:i:3:p:749-768
    DOI: 10.1016/j.jce.2026.03.003
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    Keywords

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    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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