Market discipline and corporate efficiency: evidence from Bulgaria

In this paper we investigate the impact of an increase in market discipline on total factor productivity (TFP) growth at the level of the firm in Bulg aria during 1991-95, focusing in particular on the effect of trade Liberali zation, corporatization and rationalization of conglomerates, and hard budg et constraints. The data support the predicted relationship between increas es in market discipline and subsequent productivity growth. Our results dem onstrate the need to distinguish between exporting and non-exporting enterp rises in assessing the impact of trade liberalization and the importance of taking into account other relevant policy changes. JEL Classification: F14 , D24.