Municipally Owned Corporations and Private Firm Entry Evidence from Swedish Municipalities, 2015–2024

Abstract

This thesis examines whether municipally owned corporations (MOCs) crowd out private firm entry in Swedish municipalities. Using a balanced panel of all 290 Swedish municipalities over 2015–2024, I estimate Poisson fixed-effects models with population exposure to analyse the relationship between lagged, ownership-weighted MOC financial results and the number of newly formed private firms. The analysis yields three principal findings. First, there is no evidence that MOC activity crowds out private firm entry; better MOC financial performance is associated with more new firms. Second, this positive relationship is conditional on political governance: it is substantially stronger under left-wing governance and largely absent under centre-right rule. Third, the relationship is asymmetric, concentrated among MOC profits rather than losses, consistent with a fiscal capacity mechanism in which left-wing municipalities would channel MOC surpluses into local public goods that complement private economic activity.