DP1900 Ownership and Growth

Author(s): Thorvaldur Gylfason, Tryggvi Thor Herbertsson, Gylfi Zoega
Publication Date: June 1998
Keyword(s): Endogenous Growth, state-owned enterprises, static and dynamic efficiency
JEL(s): O41, P12
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1900

This paper introduces state-owned enterprises into an endogenous-growth model with an expanding variety of inputs. It shows that, if state firms are less efficient than private firms in organizing labour and also in adopting new technology, the rate of innovation and, hence, also the rate of growth of output will be lower in the long run, ceteris paribus, because the rate of innovation is adversely affected. The model is tested on cross-section data for about 75 industrial and developing countries over the period 1978?92. We find that the size of state-owned sector is inversely related to total factor productivity and economic growth.