Abstract
The aim of the paper is to explore whether and what kind of competition policy is desirable for SEE countries using growth rate optimisation as the criterion. The conclusion is that competition is good for the economic growth of the SEE countries. Their growth is based on the increase in the total factor productivity (TPF), mainly on account of the restructuring process and reallocation of resources, but also due to the adoption of modern technology. Competition provides key incentives for this type of economic growth and no disadvantage of competition has been recorded for the TFP based growth. Accordingly, effective competition policy in the SEE countries is essential for avoiding the middle income convergence trap. Taking into account that the business environment in the SEE countries still lags behind the business environment of “Old Europe”, that economic freedom is somewhat curtailed, and that there are still important legal barriers to entry, advocacy should be a priority of the competition policy. Additional efforts are needed for designing a suitable competition advocacy strategy, allocating resources needed for effective advocacy, and changing some of the legislative provisions to grant more power to the national competition authorities (NCAs) to conduct their advocacy activities. Taking into account that restructuring contributes significantly to the economic growth of these countries, and that mergers and acquisitions facilitate that process, merger control should not be an obstacle to this process. For that very reason it is important that merger control in SEE countries be lenient. The best way forward would be to increase the notification thresholds. Such a move would save some NCA resources, which can be allocated to competition advocacy.
Highlights
Economic growth is the paramount objective of the SEE countries.1 That is quite understandable: the Region is still the poor side of Europe, as it has been for decades
After initial restructuring that was carried out prior to 2002, there are fewer activities that can be restructured and an increase in capital accumulation is needed for new technology to be introduced. This means that the share of total factor productivity (TFP) growth in the case of the economic growth of SEE countries will probably continue to decrease, but that is irrelevant for the finding on desirability of competition policy, since competition is good for both innovation, i.e. adoption of modern technology, and for firm restructuring, and both intra- and inter-industry reallocation
Competition is good for the economic growth of the SEE countries
Summary
Economic growth is the paramount objective of the SEE countries. That is quite understandable: the Region is still the poor side of Europe, as it has been for decades. Economic growth is the paramount objective of the SEE countries.. That is quite understandable: the Region is still the poor side of Europe, as it has been for decades. Maddison (2007) demonstrated that the per capita income differences between the two regions have even increased during that period.. In this paper the role of competition policy is evaluated only from the perspective of speeding up the long-term economic growth of the SEE countries. It is presumed that there is no other aim of competition policy but to increase the economic growth rate to the optimal one.. Growth rate optimisation can be compared to social welfare criteria, which is a static notion, commonly used as the standard in competition law enforcement.
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