Efficiency and Market Share in the Hungarian Corporate Sector

László Halpern () and KÅ‘rösi, Gábor
Authors registered in the RePEc Author Service: Gabor Korosi

No 2544, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: One of the major tasks facing a transition economy is to create the competitive environment of a properly functioning market economy. It is widely believed that competition has a positive effect on efficiency, but the theoretical and empirical support is quite scarce. The objective of this paper is to investigate the link between competition and efficiency for the Hungarian corporate sector during various phases of the transition process. We employ frontier production functions for exploring differences among groups of firms, and for identifying the typical adjustment process of each group separately throughout the transition period until 1997. Groups are defined according to industries, size, and ownership. The estimated production functions indicate a gradual improvement in efficiency and a shift from decreasing to increasing returns to scale due to a growing share of small firms entering the higher returns regime. Market shares can be explained by the degree of internal and external competition and by the efficiency of the firm. The transitional recession in 1990–1 was followed by a fast consolidation period, with rapidly increasing firm level efficiency and improving returns to scale. This consolidation period ended in 1994–5, and after that mean firm level efficiency only changed slowly. Massive investments largely increased the market share of the better performing firms and sectors, resulting in rapid economic growth. However, this economic growth may become vulnerable if productive efficiency fails to improve faster.

Keywords: Efficiency; Production functions; firm in transition economy (search for similar items in EconPapers)
JEL-codes: C23 D21 D24 (search for similar items in EconPapers)
Date: 2000-08
References: Add references at CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Efficiency and market share in the Hungarian corporate sector (2001)
Working Paper: Efficiency and Market Share in Hungarian Corporate Sector (2000)
Working Paper: Efficiency and Market Share in Hungarian Corporate Sector (2000)
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