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The Effects of Privatization and Competitive Pressure on Firms’ Price-Cost Margins: Micro Evidence from Emerging Economies

Author

Listed:
  • Konings, Jozef

    (Department of Economics, Aarhus School of Business)

  • Van Cayseele, Patrick

    (Department of Economics, Aarhus School of Business)

  • Warzynski, Frédéric

    (Department of Economics, Aarhus School of Business)

Abstract

This paper uses representative panel data of 1,701 Bulgarian and 2,047 Romanian manufacturing firms to analyze how price-cost margins are affected by privatization and competitive pressure. Privatization is associated with higher price-cost margins. This effect is stronger in highly competitive sectors, which suggests that the creation of competitive markets and privatization go together. This also suggests that privatized firms reduce costs, rather than increase prices, as in highly competitive markets firms are more likely price-takers. Import penetration is associated with lower price-cost margins in sectors where product market concentration is high, but in more competitive sectors this effect is reversed.

Suggested Citation

  • Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frédéric, 2003. "The Effects of Privatization and Competitive Pressure on Firms’ Price-Cost Margins: Micro Evidence from Emerging Economies," Working Papers 03-17, University of Aarhus, Aarhus School of Business, Department of Economics.
    • Handle: RePEc:hhs:aareco:2003_017
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    More about this item

    Keywords

    Competition; privatization; firm performance; transition;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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