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Market discipline and corporate efficiency: evidence from Bulgaria

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  • Simeon Djankov
  • Bernard Hoekman

Abstract

In this paper we investigate the impact of an increase in market discipline on total factor productivity (TFP) growth at the level of the firm in Bulgaria during 1991-95, focusing in particular on the effect of trade liberalization, corporatization and rationalization of conglomerates, and hard budget constraints. The data support the predicted relationship between increases in market discipline and subsequent productivity growth. Our results demonstrate the need to distinguish between exporting and non-exporting enterprises in assessing the impact of trade liberalization and the importance of taking into account other relevant policy changes.
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Suggested Citation

  • Simeon Djankov & Bernard Hoekman, 2000. "Market discipline and corporate efficiency: evidence from Bulgaria," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(1), pages 190-212, February.
    • Handle: RePEc:wly:canjec:v:33:y:2000:i:1:p:190-212
    DOI: 10.1111/0008-4085.00012
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    Cited by:

    1. Kornai, János & Maskin, Eric & Roland, Gérard, 2022. "A puha költségvetési korlát - I [The soft budget constraint I]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 75-93.
    2. Kee, Hiau Looi & Hoekman, Bernard, 2007. "Imports, entry and competition law as market disciplines," European Economic Review, Elsevier, vol. 51(4), pages 831-858, May.
    3. Narjess Boubakri & Jean-Claude Cosset & Omrance Guedhami, 2001. "Liberalization, Corporate Governance, and the Performance of Newly Privatized Firms," William Davidson Institute Working Papers Series 419, William Davidson Institute at the University of Michigan.
    4. Brucker, Herbert & Schroder, Philipp J.H. & Weise, Christian, 2005. "Can EU conditionality remedy soft budget constraints in transition countries?," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 371-386, June.
    5. Marc-Andreas Muendler, 2004. "Trade, Technology, and Productivity: A Study of Brazilian Manufacturers, 1986-1998," CESifo Working Paper Series 1148, CESifo.
    6. Yueling Cai & Gongliang Wu & Dingsheng Zhang, 2020. "Does Export Trade Promote Firm Innovation?," Annals of Economics and Finance, Society for AEF, vol. 21(2), pages 483-506, November.
    7. Olarreaga, Marcelo & Kee, Hiau Looi, 2001. "Mark-ups, Entry Regulation and Trade: Does Country Size Matter?," CEPR Discussion Papers 2853, C.E.P.R. Discussion Papers.
    8. Patricia Augier & Olivier Cadot & Marion Dovis, 2013. "Imports and TFP at the firm level: the role of absorptive capacity," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(3), pages 956-981, August.
    9. Muendler, Marc-Andreas, 2004. "Estimating Production Functions When Productivity Change Is Endogenous," University of California at San Diego, Economics Working Paper Series qt0w02f5tw, Department of Economics, UC San Diego.
    10. Herbert Brücker & Philipp Schröder, 2007. "EU accession and the hardening of soft budget constraints: some macro evidence," Economic Change and Restructuring, Springer, vol. 40(3), pages 235-252, September.
    11. C Sharma, 2016. "Does importing more inputs raise productivity and exports? Some evidence from Indian manufacturing," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 1-23, March.
    12. Hoekman, Bernard & Mavroidis, Petros C., 2002. "Economic development, competition policy, and the World Trade Organization," Policy Research Working Paper Series 2917, The World Bank.
    13. Patrick McCloughan & Seán Lyons & William Batt, 2007. "The Effectiveness of Competition Policy and the Price-Cost Margin: Evidence from Panel Data," Papers WP209, Economic and Social Research Institute (ESRI).
    14. Patricia Augier & Michael Gasiorek & Gonzalo Varela, 2007. "Determinants of Productivity in Morocco - The Role of Trade?," CARIS Working Papers 02, Centre for the Analysis of Regional Integration at Sussex, University of Sussex.
    15. Sanyal, Paroma & Bulan, Laarni T., 2011. "Regulatory risk, market uncertainties, and firm financing choices: Evidence from U.S. Electricity Market Restructuring," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(3), pages 248-268, June.

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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