Convergence in Institutions and Market Outcomes: Cross-Country and Time-Series Evidence from the BEEPS Surveys in Transition Economies

82 Pages Posted: 10 Dec 2008

See all articles by Pradeep Mitra

Pradeep Mitra

World Bank - Europe and Central Asia Region

Alexander Muravyev

Saint Petersburg Branch National Research University Higher School of Economics; Institute for the Study of Labor (IZA)

Mark E. Schaffer

Heriot-Watt University - Centre for Economic Reform and Transformation; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Abstract

This paper uses the BEEPS firm-level data 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

JEL Classification: G32, L11, O12, P31

Suggested Citation

Mitra, Pradeep and Muravyev, Alexander and Schaffer, Mark E., Convergence in Institutions and Market Outcomes: Cross-Country and Time-Series Evidence from the BEEPS Surveys in Transition Economies. IZA Discussion Paper No. 3863, Available at SSRN: https://ssrn.com/abstract=1312609 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Pradeep Mitra (Contact Author)

World Bank - Europe and Central Asia Region ( email )

1818 H Street
Washington, DC 20433
United States

Alexander Muravyev

Saint Petersburg Branch National Research University Higher School of Economics ( email )

Kantemirovskaya str. 3a
St. Petersburg, 194000
Russia

HOME PAGE: http://https://www.hse.ru/en/org/persons/127811036

Institute for the Study of Labor (IZA) ( email )

Schaumburg-Lippe-Str. 5-9
Bonn, D-53113
Germany

HOME PAGE: http://www.iza.org/en/webcontent/index_html

Mark E. Schaffer

Heriot-Watt University - Centre for Economic Reform and Transformation ( email )

School of Management - Department of Economics
Edinburgh EH14 4AS
United Kingdom
+44 131 451 3494 (Phone)
+44 131 451 3008 (Fax)

HOME PAGE: http://www.hw.ac.uk/ecoWWW/cert

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
77
Abstract Views
728
rank
219,231
PlumX Metrics