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 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.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Length: pages Date of creation: 01 Jul 2000 Date of revision: Handle: RePEc:wdi:papers:2000-333
Contact details of provider: Postal: 724 E. University Ave. Wyly Hall, Floor 1, Ann Arbor, Michigan 48109-1234 Phone: 734 615 4566 Fax: (734) 763-5850 Email: Web page: http://www.wdi.umich.edu More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Patricia Loh).
Find related papers by JEL classification: C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data D21 - Microeconomics - - Production and Organizations - - - Firm Behavior D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)