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Title:Do Market Pressures Induce Economic Efficiency: The Case of Slovenian Manufacturing, 1994-2001 PDF Logo
Authors:Orazem, Peter F.
Vodopivec, Milan
Issue Date:2003
Series/Report no.:IZA Discussion paper series 901
Abstract:The Slovenian transition represents a slow but steady liberalization of constraints on competition. Using a unique longitudinal data set on all manufacturing firms in Slovenia over the period 1994-2001, this study analyzes how firm efficiency changed in response to changing competitive pressures, holding constant firm attributes. Results show that the period was one of atypically rapid growth of total factor productivity (TFP) relative to levels in OECD countries, and that the rise in firm efficiency occurs across almost all industries and firm types: large or small; state or private; domestic or foreign-owned. Changes in firm ownership type have no impact on firm efficiency. Rather, competitive pressures that sort out inefficient firms of all types and retain the most efficient, coupled with the entry of new private firms that are at least as efficient as surviving firms, prove to be the major source of TFP gains. Market competition from new entrants, foreign-owned firms, and international trade also raise firm efficiency in the industry. Results strongly confirm that market competition fosters efficiency.
Subjects:efficiency
competition
growth
total factor productivity
Slovenia
JEL:P27
L1
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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