I want a quiet life! On productivity and competition in the Central European energy sector

Abstract

An important proposition in Economics claims that competition spurs technical efficiency, as it forces firms to raise competitiveness to survive market pressure. This study examines the effects of firm-level Lerner indexes on productivity, using a dataset on energy firms from Central European postcommunist countries during 2009–2017. The energy sector is of particular interest, as markets are still concentrated, although governments have liberalized them considerably. To contribute to the literature, I derive Lerner indexes from the production function next to involving the return on sales. Supporting the literature, the overall results highlight that market power significantly decreases productivity.