Comparative analysis of competitiveness - the Czech Republic and Hungary - an institutional approach

This paper compares the competitiveness of Hungary and the Czech Republic. Of the different approaches to what constitutes competitiveness, it takes the institutional one, which is crucial to the behaviour of market actors. Weak legal institutions such as non-functioning bankruptcy legislation increase costs and decrease the ability of firms to compete. But there are obvious problems with measuring the quality of the environment for competitiveness. The three aspects considered are the political, the legal (including corruption) and the general economic environment. Global statistics are provided for each, such as the Index of Economic Freedom, followed by data that address specific questions, such as ‘How many days a year do your managers have to spend dealing with state officials?’ The survey results are intended to give an overall picture in each field. The two countries seem to have similarly high levels of political freedom. Both are deemed generally free, according to all measures (with minor reservations). The situation is worse with the legal environment, where both lag substantially behind the Western countries, but the situation in the Czech Republic is worse. The findings on corruption are similar, where the situation is poor according to most sources, especially in the Czech Republic. The last chapter of the analysis is devoted to economic freedoms – especially regulation of the business environment. Both countries can be considered partly free. The regulation and bureaucracy-related costs seem higher in the Czech Republic.