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competitors three years before the survey. We therefore focus on the results using the 2005 data only; by using lagged values available in 2005 we can somewhat mitigate the endogeneity problem as applied to the market structure variables, but not others such as elasticity of demand and various pressures.

We use the 4-component index of deep restructuring; the results are similar using other measures. The regressions are reported separately for all groups of countries, including the pre-2001 EU members Germany and the cohesion countries. The explanatory variables include measures of ownership (state-owned and privatized; the omitted category is new private), size (log employment), location (big city dummy), number of competitors (omitted category is 1-3 competitors), price elasticity of demand (omitted category is highly price elastic), pressure to innovate from domestic competitors, foreign competitors, customers, and sector and country dummies. The results are shown in Table VI.3.

First, as should be expected, larger firms are more likely to have engaged in more deep restructuring measures than smaller firms. The impact of size is found in all country groups, including the developed market economies, and the magnitude of the impact is about the same in all. The ownership variables show that in TEs, not surprisingly, state- owned firms are less active than new private firms; privatized firms are less active than new private firms as well, but if anything more active than state-owned firms. The differences are not, however, huge: the coefficient on the SOE dummy ranges from about

  • -

    0.07 to about -0.16. The index is an average of 4 measures and takes the values of 0 to

    • 1.

      Although SOEs in TEs have engaged in less deep restructuring than private firms, they

are not simply “dinosaurs”. The absence of any measurable ownership effects in Germany and the cohesion countries is due simply to the very small number of privatized and state-owned firms in the samples for these countries.

The most interesting results relate to the role of competition. First, we find no significant impact of market structure on restructuring. As suggested by Carlin, Schaffer and Seabright (2004), this null result may stem from the endogeneity of market structure.


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