Does Competition Policy Implementation Affect the Intensity of Competition?*

Although many transition and developing economies have established competition offices, there is yet little systematic evidence about implementation experience and its impact on intensity of economywide competition. This paper aims to fill this gap in the literature in two ways. First, it provides an overview of progress in implementation based on a major survey directed to both competition agencies and legal experts in the area of competition policy implemented over a ten year period from 1995 to 2005. It then examines the main policy and structural determinants of the intensity of competition at the enterprise level across transition economies, presenting new evidence using three rounds of an enterprise-level survey implemented in 1999, 2002 and 2005 by the EBRD and the World Bank. The key findings are summarized as follows. At the country level, an important finding is that competition policy implementation is significantly and positively correlated with the intensity of competition, a result which holds robustly from all the three rounds of the enterprise level surveys and to the introduction of other policy-level controls and alternative specifications of the basic model. On the contrary, privatization is either not significantly or is negatively correlated to the intensity of competition, confirming that privatization, in the absence of the development of adequate market supporting institutions, does not lead to a more competitive environment.