Convergence in institutions and market outcomes: Cross-country and time-series evidence from the BEEPS surveys in transition economies

Pradeep Mitra, Alexander Muravyev and Mark Schaffer ()
Authors registered in the RePEc Author Service: Александр Муравьев

No 809, CERT Discussion Papers from Centre for Economic Reform and Transformation, Heriot Watt University

Abstract: This paper uses firm-level data from the Business Environment and Enterprise Performance Surveys (BEEPS) to study the process of convergence of transition countries with developed market economies. The primary focus of the study is on competition and market structure, finance and the structure of lending to firms, and how firms respond to the economic environment by restructuring; we are able to do this because the BEEPS cover thousands of firms from virtually all transition countries over a long time period (1996-99 through 2002-05), as well firms from developed market economies, thus providing a set of natural benchmarks. We find substantial evidence of convergence of transition countries with developed market economies in a number of dimensions. The pattern of growth at the country, sectoral and firm level shows rapid growth of the new private sector and of the micro- and small-firm sectors, with the size distribution of firms moving towards the pattern observed in the BEEPS surveys of developed market economies. Our interpretation of the evidence on competition is that there is an initial move by firms into niches to exploit local market power, and later in transition entry and domestic competitive pressure increases. In finance, the 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 scale of restructuring and innovation activity is as high or higher in transition economies as in developed market economies. Interestingly, we find evidence of an inverse-U shape 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.

Keywords: transition; convergence; market structure; competition; enterprise finance; enterprise restructuring (search for similar items in EconPapers)
JEL-codes: G32 L11 O12 P31 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-com and nep-tra
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Convergence in Institutions and Market Outcomes: Cross-Country and Time-Series Evidence from the BEEPS Surveys in Transition Economies (2008)
Working Paper: Convergence in Institutions and Market Outcomes: Cross-Country and Time-Series Evidence from the BEEPS Surveys in Transition Economies (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hwe:certdp:0809

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