DP664 Market Concentration and Competition in Eastern Europe

Author(s): Paul A Kattuman, David M G Newbery
Publication Date: April 1992
Keyword(s): Competition Policy, Concentration, Eastern Europe, Enterprise Size Distribution
JEL(s): L11, L23, O12, P23, P51, P52
Programme Areas: Applied Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=664

A key feature of Soviet-type economies is the excessive concentration of production and the skewed size distribution of enterprises. This is the root cause of the `soft budget constraint' and a natural outcome of the political economy of these countries. Given entrenched political support for a system which favours producers relative to consumers, it will be hard to pursue an active competition policy, though it is essential for successful reform. We examine a hypothetical restructuring of Polish state enterprises and argue that this should be undertaken before they are privatized. Hungary appears to have started such a process already.