Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144162
Authors: 
Gesheva, Nadezhda
Vasilev, Aleksandar
Year of Publication: 
2016
Abstract: 
This paper examines Adam Smith’s concept of an Invisible Hand of the market in light of the underlying assumptions for the theory to hold. Furthermore, the study focuses on Total Factor Productivity as a measure of efficiency of resource allocation, employs growth accounting in Bulgaria relative to a frontier country (Germany), and tries to explain the Total Factor Productivity gap with the difference in the quality of institutions and economic freedom performance (where the latter is based on the Freedom Index Indicators). Satisfactory results have been obtained, favoring the hypothesis that freer markets perform better and a “catching up” effect of Bulgaria’s Total Factor Productivity levels towards those of Germany has been observed. Finally, the study provides policy recommendations facilitating the Invisible Hand Process in Bulgaria for a more rapid convergence towards Germany’s productivity levels.
Subjects: 
Invisible Hand of the Market
Free Market Economy
Total Factor Productivity
Convergence
JEL: 
C82
O11
Document Type: 
Preprint

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