Efficiency and Market Share in Hungarian Corporate Sector
AbstractOne 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 higher returns regimes. Market share can be explained by the degree of internal and external competition and by the efficiency of the firm. 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, 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 InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 333.
Date of creation: 01 Jul 2000
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firm in transition economy; production functions; efficiency;
Other versions of this item:
- Gabor Korosi & Laszlo Halpern, 2000. "Efficiency and Market Share in Hungarian Corporate Sector," IEHAS Discussion Papers 0009, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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