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Efficiency and market share in the Hungarian corporate sector

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  • László Halpern
  • Gábor Körösi

Abstract

One of the major tasks facing a transition economy is to create the competitive environment of a properly functioning market economy. It is widely believed that competition has a positive effect on efficiency, but the theoretical and empirical support is quite scarce. The objective of this paper is to investigate the link between competition and efficiency for the Hungarian corporate sector during various phases of the transition process. We employ frontier production functions for exploring differences among groups of firms, and for identifying the typical adjustment process of each group separately throughout the transition period until 1997. Groups are defined according to industries, size, and ownership. The estimated production functions indicate a gradual improvement in efficiency and a shift from decreasing to increasing returns to scale due to a growing share of small firms entering the higher returns regime. Market shares can be explained by the degree of internal and external competition and by the efficiency of the firm. The transitional recession in 1990–1 was followed by a fast consolidation period, with rapidly increasing firm level efficiency and improving returns to scale. This consolidation period ended in 1994–5, and after that mean firm level efficiency only changed slowly. Massive investments largely increased the market share of the better performing firms and sectors, resulting in rapid economic growth. However, this economic growth may become vulnerable if productive efficiency fails to improve faster.

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 9 (2001)
Issue (Month): 3 (November)
Pages: 559-592

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Handle: RePEc:bla:etrans:v:9:y:2001:i:3:p:559-592

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Cited by:
  1. Rumen Dobrinsky & Gábor Korösi & Nikolay Markov & László Halpern, 2004. "Firms’ Price Markups and Returns to Scale in Imperfect Markets: Bulgaria and Hungary," William Davidson Institute Working Papers Series 2004-710, William Davidson Institute at the University of Michigan.
  2. Békés, Gábor & Halpern, László & Muraközy, Balázs, 2013. "Külkereskedelem és a vállalatok közötti különbségek
    [Heterogeneous firms and foreign trade]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 1-24.
  3. Astrid Cullmann & Christian von Hirschhausen, 2007. "From Transition to Competition: Dynamic Efficiency Analysis of Polish Electricity Distribution Companies," Discussion Papers of DIW Berlin 716, DIW Berlin, German Institute for Economic Research.
  4. Nebojsa Stojcic & Marija Becic & Perica Vojinic, 2012. "The Competitiveness of Exports from Manufacturing Industries in Croatia and Slovenia to the EU-15 Market: A Dynamic Panel Analysis," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 14(1), pages 69-105, April.
  5. Patricia AUGIER & Olivier CADOT & Marion DOVIS, 2012. "Imports and TFP at the Firm Level: The Role of Absorptive Capacity," Working Papers P44, FERDI.
  6. Balázs, Muraközy & Halpern, László, 2005. "Does Distance Matter in Spillover?," CEPR Discussion Papers 4857, C.E.P.R. Discussion Papers.
  7. Giovanni Peri & Dieter M. Urban, 2003. "The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany," Working Papers 31, University of California, Davis, Department of Economics.
  8. Mathilde Maurel, 2001. "Investment, Efficiency, and Credit Rationing: Evidence from Hungarian Panel Data," William Davidson Institute Working Papers Series 403, William Davidson Institute at the University of Michigan.
  9. Major, Iván, 2002. "Miért (nem) sikeresek a magyar középvállalatok?
    [Why do (or do not) medium-sized Hungarian firms succeed?]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 993-1014.
  10. Karoly Fazekas & Jeno Koltay (ed.), 2003. "The Hungarian Labour Market 2003," The Hungarian Labour Market Yearbooks, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, number 2003, January.
  11. Gabor Kezdi, 2002. "Two Phases of Labor Market Transition in Hungary: Inter-Sectoral Reallocation and Skill-Biased Technological Change," Budapest Working Papers on the Labour Market 0203, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  12. Tinh Doan & Son Nguyen & Tuyen Tran & Huong Vu & Steven Lim, 2014. "Does Rising Import Competition Harm Local Firm Productivity in Less Advanced Economies? Evidence from Vietnam's Manufacturing Sector," Working Papers in Economics 14/09, University of Waikato, Department of Economics.
  13. Malinka Koparanova, 2007. "Structural Changes in the Manufacturing Industry of Transition Economies," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 3-42.
  14. Amess, Kevin & Roberts, Barbara M., 2007. "The productivity effects of privatization: The case of Polish cooperatives," International Review of Financial Analysis, Elsevier, vol. 16(4), pages 354-366.
  15. László Halpern & Gábor Kõrösi, 2003. "Corporate performance and market structure during transition in Hungary," William Davidson Institute Working Papers Series 2003-606, William Davidson Institute at the University of Michigan.
  16. Dobrinsky, Rumen & Korosi, Gabor & Markov, Nikolay & Halpern, Laszlo, 2006. "Price markups and returns to scale in imperfect markets: Bulgaria and Hungary," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 92-110, March.

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