Competition and Firm Productivity: Evidence from Firm-Level Data

Abstract

This paper presents empirical evidence on the impact of competition on firm productivity. Using firm-level observations from the World Bank Enterprise Survey database, we find a positive and robust causal relationship between our proxies for competition and our measures of productivity. We also find that countries that implemented product-market reforms had a more pronounced increase in competition, and correspondingly, in productivity: the contribution to productivity growth due to competition spurred by product-market reforms is around 12-15 percent.

Keywords: Central Asia, Competition, Cross country analysis, Eastern Europe, Economic models, Economic reforms, Industrial sector, Markets, Production growth, Productivity