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The Effects of Privatization and Competitive Pressure on Firms’ Price-Cost Margins: Micro Evidence from Emerging Economies

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Author Info

  • Konings, Jozef

    (Department of Economics, Aarhus School of Business)

  • Van Cayseele, Patrick

    (Department of Economics, Aarhus School of Business)

  • Warzynski, Frédéric

    ()
    (Department of Economics, Aarhus School of Business)

Abstract

This paper uses representative panel data of 1,701 Bulgarian and 2,047 Romanian manufacturing firms to analyze how price-cost margins are affected by privatization and competitive pressure. Privatization is associated with higher price-cost margins. This effect is stronger in highly competitive sectors, which suggests that the creation of competitive markets and privatization go together. This also suggests that privatized firms reduce costs, rather than increase prices, as in highly competitive markets firms are more likely price-takers. Import penetration is associated with lower price-cost margins in sectors where product market concentration is high, but in more competitive sectors this effect is reversed.

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Bibliographic Info

Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 03-17.

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Length: 31 pages
Date of creation: 17 Jan 2003
Date of revision:
Handle: RePEc:hhs:aareco:2003_017

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Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Phone: +45 89 486396
Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx
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Keywords: Competition; privatization; firm performance; transition;

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