Productive Efficiency During Transition : Evidence from Bulgaria

New and unusually rich panel data for Bulgarian companies during late communism and early transition were used to investigate the determinants of productive efficiency. Compared to conventional production functions, stochastic frontier models were found to be the preferred specifications. Typically, enterprise performance was found to be unaffected by several factors, including the extent of exports, joint venture status, labor management relations and unionization. However, business efficiency was enhanced by incentive compensation arrangements. Compared to fading communism, the determinants of productive efficiency were found not to have changed much during early transition. Average firm efficiency was also investigated and found to be quite low between 0.603 and 0.720. This dispersion has grown during early transition