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Market Structure and Competition in Transition: Results from a Spatial Analysis

Lábaj, Martin and Morvay, Karol and Silanic, Peter and Weiss, Christoph and Yontcheva, Biliana (2016) Market Structure and Competition in Transition: Results from a Spatial Analysis. Department of Economics Working Paper Series, 218. WU Vienna University of Economics and Business, Vienna.

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Abstract

The present paper provides first microlevel (indirect) empirical evidence on changes in the determinants of firm profitability, the role of fixed and sunk costs, as well as the nature of competition for a transition economy. We estimate size thresholds required to support different numbers of firms for four retail and professional service industries in a large number of geographic markets in Slovakia. The three time periods in the analysis (1995, 2001 and 2010) characterize different stages of the transition process. Specific emphasis is given to spatial spill-over effects between local markets. Estimation results obtained from a spatial ordered probit model suggest that entry barriers have declined considerably (except for restaurants) and the intensity of competition has increased. We further find that demand spill-overs and/or the effects associated with a positive correlation in unobservable explanatory variables seem to outweigh negative spill-over effects caused by competitive forces between neighboring cities and villages. The importance of these spatial spill-over effects differs across industries.

Item Type: Paper
Keywords: entry thresholds / competition / Slovakia / transition / geographic markets
Classification Codes: JEL L22, D22, M13, R11
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 15 Feb 2016 13:09
Last Modified: 15 Feb 2016 13:09
URI: http://epub.wu.ac.at/id/eprint/4851

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