Productivity Differential and Competition: Can an Old Dog be Taught New Tricks?

Belief that competition is beneficial in general and for productive efficiency in particular is likely to root in competition's well established and rigorously proved positive relation to the optimal allocation of economic resources. This paper looking at the production side of the economy attempts to provide another argument in favor of competition as a productivity enhancing mechanism or to raise the issue of the importance of competition in a transition context. The author suggests an alternative view of the subject, which is merely 'traditional' in the literature devoted to transition economies, by indirect testing of the competition effect on the individual firms' productivity. The project strives to test the relationship between the level of competition and variance of technical efficiency of individual enterprises.