countries on the employment buffering role of SOEs during crises. The study found that SOEs in Latvia shed jobs at a slower rate than POEs during the 2008-09 global financial crisis, thus mitigating the negative effect on jobs during the recession. In Serbia, the SOE sector shed jobs faster than the POE sector over the entire 2007-16 period, irrespective of the economic cycles. While governments may not, as a policy goal, be actively using SOE employment to cushion the adverse job effects of economic crises, SOEs may be a passive means of maintaining stable jobs for their citizenry. Szarzec, Dombi, and Matuszak (2021) found that while domestic and foreign-owned firms reacted to the 2008 global financial crisis by decreasing their net job creation, Hungarian SOEs did not reduce their net job creation. During the COVID-19 pandemic, in most countries, SOEs did not furlough or fire employees (IMF 2021). A household survey conducted by the EBRD (2020) in August 2020 revealed that employees of state firms were less likely to lose their jobs or see their income reduced in the early months of the COVID-19 crisis. This is consistent with findings for the global financial crisis. Overall, it is worth noting that data limitations often prevent insights on the buffer effects of SOEs during crises.

**Finally, some studies have examined how a greater SOE footprint in markets affects competition and market outcomes, such as business dynamism and allocative efficiency** . Business dynamism matters for aggregate productivity improvements and economic growth. In a study on China, Cerdeiro and Ruane (2022) found that in provinces where SOEs account for a larger share of the capital stock, manufacturing sector business dynamism in those provinces tended to be weaker. Other studies have highlighted that the presence of the state in markets is associated with entry barriers and, thus, lower entry rates of new firms. Using 1995, 2004, and  2008 data from the Chinese Industrial Census, Brandt, Kambourov, and Storesletten (2020) indicate that a key factor underlying the dispersion and dynamics of aggregate total factor productivity and wages across Chinese prefectures were entry barriers, which in turn were linked to significant state presence in economic activities. The reduction in SOE employment in prefectures between 1995 and 2004 was systematically linked to the reduction in entry barriers, and prefectures where SOE employment fell over the period saw faster growth in wages and labor productivity, capital per worker, and aggregate total factor productivity. Further, Iootty, Pop and Pena (2020) show that certain firm characteristics in Romania, notably state ownership, matter in explaining differences in markup performance as a proxy for competition (a higher markup  indicative of lower competitive pressure). The authors find that both majority and minority owned SOEs tend to demonstrate the highest markup premiums when compared with domestic privately owned companies, especially in the manufacturing sector. The average difference in markup is higher for companies with minority state ownership (28.9 percent) than for fully state-owned companies (20 percent). However, in manufacturing, markups of fully state-owned firms (100% state shareholding) are the highest on average, at 52.7 percent,  compared to domestic privately owned firms. Iootty and Dauda (2017) also found that Chinese manufacturing SOEs had higher markups than non-SOEs compared to their POEs peers, even after controlling for firm location and whether they were subsidized.

# 3. Data Sources

The analysis relies on data from two main sources and a taxonomy of sectors. The data sources are (1) Romania MoF firm-level data for the period 2011-20, and (2) the World Bank Businesses of the State (BOS) database for Romania, and (3) the taxonomy of sectors developed by Dall'Olio et al. (2022b).

## 3.1 Romanian Firm-Level Data

**The data used is the Romanian MoF firm-level data** . The data is from the Ministry of Finance, and it has no size threshold restriction as it covers micro, small, medium, and large enterprises in Romania over

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