Working Paper: CEPR ID: DP1424
Authors: Simeon Djankov; Bernard Hoekman
Abstract: This paper investigates the relationship between firm restructuring and international competition in Bulgaria during 1991?4. Two hypotheses are tested. First, firms in industries that are subject to significant international competition demonstrate greater increases in efficiency over time than firms in industries that remain sheltered from such competition. Second, firms within an industry that rely significantly upon export sales reduce costs faster than those that rely primarily on the local market. Neither hypothesis is rejected. The firm-level data suggest that international competition led to substantial cost efficiency improvements. Entry and exit of firms is found to have a significant additional impact on the evolution of marginal costs in most industries.
Keywords: Bulgaria; Economics of Transition; International Trade; Firm Efficiency
JEL Codes: D24; F14; O52; P31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| international competition (F53) | increased efficiency (D61) |
| export reliance (F10) | faster cost reductions (D61) |
| entry and exit of firms (D21) | changes in marginal costs (D40) |
| export reliance (F10) | lower marginal costs (D40) |