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Evidence from previous studies concerning the evolution of the market structure and competition is incomplete and fragmented. While many studies have focused on the effect of market structure and competition on firm restructuring and performance (see,

  • e.

    g., Aghion, Carlin and Schaffer 2002; Angelucci, Estrin, Konings, and Zolkiewski

    • 2002)

      , little is known about changes and convergence in this aspect of business

environment per se. Carlin, Estrin and Schaffer (2000) is one of the few exceptions that offers benchmarking of competition in the transition and market economies, using a survey sample of manufacturing firms in Poland, Romania and Spain.

The BEEPS surveys contain several measures of competition. The BEEPS market structure measure is the response to the question: “Thinking of your firm’s major product line or main line of services in the domestic market, how many competitors do you face?” There are three possible responses: none (monopoly); 1-3 (oligopoly or rivalry); 4 or more (competitive). A measure of the price elasticity measure is captured by the response to the question: “If you were to raise your prices of your main product line or main line of services 10% above their current level in the domestic market, which of the following would best describe the result assuming that your competitors maintained their current prices?” There are four possible responses based on how the firm’s customers would respond, ranging from (1) customers would continue to buy the same quantities from the firm, to (4) customers would buy from the competition instead. The BEEPS surveys also contain questions relating to the importance of import competition, and on the role of competition in spurring restructuring and innovation.

We begin with market structure. Table IV.1 shows the composition of the year and region samples according to the proportion stating the number of competitors they faced (none, 1-3, or 4+). The degree of competition faced by firms in TEs (country groups III- V) increased between 1999 and 2002, and in 2005, was similar to, though still slightly below that, faced by firms in the pre-2001 EU members (country groups I-II). These results are robust to controlling for firm characteristics such as size and industry, and across country region. The similar levels of competition in 2002 and 2005 in the TEs may be contaminated by a change in the way the question was asked (in 2005, firms were


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