State Ownership Biases Government Support
Title: State Ownership Biases Government Support (with Clarissa Mang)
Abstract: A widely held concern about state ownership is that governments tend to support firms they own more generously than comparable firms they do not own, leading to unfair and inefficient distortions in competition. We provide empirical evidence that state ownership has indeed a causal effect on government support. We exploit a unique data set of more than 1600 public, private not-for-profit and private for-profit hospitals in Germany that were eligible to apply for stimulus money during the financial crisis in 2009. In our sample ownership is largely predetermined and as good as randomly assigned. Public hospitals received significantly and substantially more stimulus money than their private counterparts which cannot be explained by observable characteristics of the hospitals and their environments.