Gylfason, ThorvaldurHerbertsson, Tryggvi ThorZoega, Gylfi2014-03-272014-03-272001-09World Bank Economic Reviewhttps://hdl.handle.net/10986/17439This article suggests how state enterprises can be incorporated into the theoretical and empirical growth literature. Specifically, it shows that if state enterprises are less efficient than private firms, invest less, employ less skilled labor, and are less eager to adopt new technology, then a large state enterprise sector tends to be associated with slow economic growth, all else remaining the same. The empirical evidence for 1978-92 indicates that, through a mixture of these channels, an increase in the share of state enterprises in employment by one standard deviation could reduce per capita growth by one to two percentage points a year from one country to another.en-USCC BY-NC-ND 3.0 IGOALLOCATIONALLOCATION OF RESOURCESAVERAGE GROWTHBANKING SERVICESBUDGET CONSTRAINTBUDGET CONSTRAINTSCAPITAL STOCKCAPITALISMCOMMUNISMCOMPETITIVE MARKETCORPORATE OWNERSHIPCOST MINIMIZATIONDEVELOPING COUNTRIESDEVELOPMENT INDICATORSECONOMIC ACTIVITYECONOMIC AFFAIRSECONOMIC GROWTHECONOMIC POLICYECONOMIC STUDIESECONOMICSEDUCATIONAL ATTAINMENTELASTICITYEMPIRICAL EVIDENCEEMPIRICAL GROWTH LITERATUREEMPIRICAL RESULTSEMPIRICAL STUDIESENTERPRISE EMPLOYMENTENTREPRENEURSHIPESTIMATION METHODEXTERNAL DEBTFACTORS OF PRODUCTIONFISCAL DEFICITSFOREIGN COMPETITIONGDPGOVERNMENT BUDGETGOVERNMENT EXPENDITUREGOVERNMENT OWNERSHIPGROWTH EFFECTGROWTH EQUATIONGROWTH PROCESSGROWTH RATEGROWTH REGRESSIONGROWTH REGRESSIONSGROWTH THEORYHEALTH CAREHUMAN CAPITALINCOME INEQUALITYINCORPORATEDINCREASES GROWTHINDEPENDENT VARIABLEINEFFICIENT STATE ENTERPRISESINFLATIONINVESTMENT RATEINVESTMENT RATIOLABOR FORCELABOR MARKETSLABOR PRODUCTIVITYLIMITEDLOW-INCOME COUNTRIESMANAGERSMONETARY ECONOMICSMONETARY POLICYMONOPOLISTMONOPOLISTSMONOPOLYNEGATIVE EFFECTPER CAPITA GROWTHPOINT ESTIMATESPOLICY RESEARCHPOLITICAL ECONOMYPOLITICAL INSTABILITYPRINCIPAL-AGENTPRIVATE ENTERPRISEPRIVATE ENTERPRISESPRIVATE FIRMSPRIVATE INDUSTRYPRIVATE INVESTMENTPRIVATE INVESTORSPRIVATE OWNERSHIPPRIVATE SECTORPRIVATIZATIONPRODUCTIVITYPROFIT MAXIMIZATIONPROFITABILITYPUBLIC DEBTPUBLIC ENTERPRISEPUBLIC ENTERPRISESPUBLIC OWNERSHIPPUBLIC SECTORPUBLIC SECTORSRAPID GROWTHREPUBLICSAVING RATESHARE OF EMPLOYMENTSKILLED LABORSOCIALISMSTANDARD DEVIATIONSTATE COFFERSSTATE ENTERPRISESTATE ENTERPRISE SECTORSTATE ENTERPRISESSTATE FIRMSSTATE INVOLVEMENTSTATE OWNERSHIPSTATE PROPERTYSTATE SECTORSTATE-OWNED ENTERPRISESTAXUNEMPLOYMENTUNIONWAGESJournal ArticleWorld Bank10.1596/17439