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Convergence in institutions and market outcomes: cross-country and time-series evidence from the business environment and enterprise performance surveys in transition economies

Author

Listed:
  • Mitra, Pradeep

    (The World Bank)

  • Muravyev, Alexander

    (IZA and DIW Berlin)

  • Schaffer, Mark E.

    (CERT, Heriot-Watt University and CEPR/IZA/WDI)

Abstract

This paper uses firm-level data from the Business Environment and Enterprise Performance Surveys to study the process of convergence of transition countries with developed market economies. The study focuses on competition and market structure, finance and the structure of lending to firms, and how firms respond to the economic environment by restructuring. The authors find substantial evidence of convergence in a number of dimensions. The pattern of growth at the country, sector, and firm levels shows rapid growth of the new private sector and of the micro and small-firm sectors, with the size distribution of firms moving toward the pattern observed in the surveys of developed market economies. In finance, increasing reliance on retained earnings in transition countries reflects a maturation of the sector as new firms come to rely less on informal and family sources of finance. The authors find evidence of an inverse-U pattern, with the peak of restructuring activity taking place in 2002, the middle of the period analyzed. Throughout, the regional patterns suggest greater convergence in the transition countries that joined the European Union in 2004 than in the other, lower-income transition economies.

Suggested Citation

  • Mitra, Pradeep & Muravyev, Alexander & Schaffer, Mark E., 2009. "Convergence in institutions and market outcomes: cross-country and time-series evidence from the business environment and enterprise performance surveys in transition economies," Policy Research Working Paper Series 4819, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4819
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    References listed on IDEAS

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    Cited by:

    1. Brixiova, Zuzana & Ncube, Mthuli, 2013. "Entrepreneurship and the Business Environment in Africa: An Application to Ethiopia," IZA Discussion Papers 7553, Institute for the Study of Labor (IZA).
    2. World Bank, 2010. "Belarus - Industrial Performance Before and During the Global Crisis : Belarus Economic Policy Notes - Note No. 3," World Bank Other Operational Studies 2907, The World Bank.
    3. World Bank, 2010. "Belarus - Industrial Performance before and During the Global Crisis : Belarus Economic Policy Notes - Note No. 1," World Bank Other Operational Studies 2906, The World Bank.
    4. Zuzana Brixiova & Balázs Égert, 2010. "Modeling Institutions, Start-ups and Productivity during Transition," OECD Economics Department Working Papers 773, OECD Publishing.
    5. Pradeep Mitra & Marcelo Selowsky & Juan Zalduendo, 2010. "Turmoil at Twenty : Recession, Recovery, and Reform in Central and Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 2682, July.

    More about this item

    Keywords

    accounting; accounting standards; advanced countries; bank borrowing; bank financing; bank loan; branches; business cycle; Business Environment; business infrastructure; capital accumulation; capital markets; capital stock; capitalist economies; competitive market; competitive markets; competitors; cost of finance; country dummies; developing countries; domestic competition; domestic competitions; domestic market; downsizing; dummy variable; dummy variables; Economic Development; economic growth; economic recovery; economic structure; economics; employment; employment growth; enterprise finance; Enterprise Performance; enterprise restructuring; entrepreneurship; equity financing; expansion; exporters; external finance; external financing; factor markets; financial constraints; financial crisis; financial development; financial institutions; financial markets; Financial Risk; financial sector; financing obstacles; firm growth; firm performance; firm size; firms; fixed investment; foreign competition; foreign markets; foreign owners; foreign ownership; globalization; growth rate; growth rates; human capital; income; income level; income levels; inflation; inflation rates; informal finance; innovation; instrument; internal financing; International Bank; international trade; investment climate; job creation; Job creation rates; labor market; labor productivity; legal protection; legal system; lenders; licensing; living standards; loan; loans from family; local market; low-income country; market conditions; market economies; market economy; market environment; market power; market structure; mature market; money lenders; monopoly; Motivation; negative shock; new market; new markets; new product; new products; oligopoly; output; Ownership Structure; price elasticity of demand; private sector growth; privatization; product markets; product quality; productivity; productivity growth; profit opportunities; property rights; rapid expansion; rapid growth; return; Risk Management; sales; size of firms; small firm; small firms; Socialist Enterprises; soft budget constraint; soft budget constraints; startup; state bank; State banks; stock markets; suppliers; sustainable growth; trading; transition countries; transition country; Transition Economies; transition economy; use of bank credit;

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