Productivity and markup estimates for Bulgaria based on firm-level data

Bulgaria has successfully liberalised its economy and integrated into global value chains, creating jobs and raising incomes. However, businesses face long-standing challenges of low productivity. Catching up has been steady but a productivity gap with the more advanced economies remains. This paper calculates labour productivity and estimates total factor productivity based on Bulgarian micro data for 2018-23 collected by the National Statistical Institute of Bulgaria and Orbis for international comparison. Bulgarian firms in some manufacturing industries such as garments or manufacturing of machinery and equipment are less productive than other countries in the greater region, while they are more productive in some services, such as computer programming. As expected, larger and foreign firms, exporters and those located in the region around Sofia are more productive. The paper estimates markups to assess competitive pressures, and such estimates are very high in a few manufacturing industries, such as pharmaceuticals and transport equipment, and a large number of service industries such as utilities, trade of vehicles, accommodation and commerce, raising concerns about the level of competition in those markets.