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Competitive Pressure in Transition: A Role for Trade and Competition Policies?

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  • Rosen Marinov

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Abstract

This paper investigates the effects of trade reforms and antitrust enforcement on the pricing behavior of firms, shedding light on the respective contributions of these policy instruments to the shaping of competitive markets. To this end, we use a rich panel data set of more than 25,000 manufacturing firms from Bulgaria, the Czech Republic, Estonia, Hungary, Poland, the Slovak Republic and Slovenia, spanning a five-year period. We find a positive and statistically significant relationship between domestic firms' mark-ups and industry protection, as reflected in MFN and trade-weighted import tariffs. The toughness of competition policy enforcement, captured by the number of final instance decisions delivered by national antitrust authorities and an index developed by the EBRD, has a negative impact of greater magnitude than tariff protection. We also test for the significance of enacting major legislative amendments with regard to competition policy in the studied countries, as well as for differential effects in export-oriented and import-competing industries.

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File URL: http://hdl.handle.net/10.1007/s10842-009-0051-8
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Bibliographic Info

Article provided by Springer in its journal Journal of Industry, Competition and Trade.

Volume (Year): 10 (2010)
Issue (Month): 1 (March)
Pages: 1-31

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Handle: RePEc:kap:jincot:v:10:y:2010:i:1:p:1-31

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Web page: http://springerlink.metapress.com/link.asp?id=105724

Related research

Keywords: competition policy; mark-up; import penetration; transitional economies; C23; K21; L4; P3;

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References

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  1. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2003. "The Effect of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," CEPR Discussion Papers 3703, C.E.P.R. Discussion Papers.
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  3. 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.
  4. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
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  9. Rumen Dobrinsky & Gabor Korosi & Nikolay Markov & Laszlo Halpern, 2004. "Firms’ Price Markups and Returns to Scale in Imperfect Markets - Bulgaria and Hungary," IEHAS Discussion Papers 0412, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  10. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, vol. 45(1), pages 167-186, January.
  11. Levinsohn, James, 1993. "Testing the imports-as-market-discipline hypothesis," Journal of International Economics, Elsevier, vol. 35(1-2), pages 1-22, August.
  12. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2001. "The dynamics of industrial mark-ups in two small open economies: does national competition policy matter?," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 841-859, April.
  13. Djankov, Simeon & Hoekman, Bernard, 1997. "Competition Law in Post-Central Planning Bulgaria," CEPR Discussion Papers 1723, C.E.P.R. Discussion Papers.
  14. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 55-66, February.
  15. Pravin Krishna & Devashish Mitra, . "Trade Liberalization, Market Discipline and Productivity Growth: New Evidence From India," Working Papers 96-8, Brown University, Department of Economics.
  16. Joaquim Oliveira Martins & Stefano Scarpetta & Dirk Pilat, 1996. "Mark-Up Ratios in Manufacturing Industries: Estimates for 14 OECD Countries," OECD Economics Department Working Papers 162, OECD Publishing.
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Cited by:
  1. Asaftei, Gabriel & Parmeter, Christopher F., 2010. "Market power, EU integration and privatization: The case of Romania," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 340-356, September.

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