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Why market based agricultural systems are superior to centrally planned ones

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  • Introduction.
  • Literature Review

The economy of most modern countries is a market economy. But there are countries where the economic system is built on planned principles. The most developed countries of the world have long developed their economic systems according to market principles, and their current successes and achievements in economic development are the best indicator of the effectiveness of such systems. In post-Soviet countries, the market economy was born relatively recently, after the collapse of the Union, and it is still far from classic market models, for various reasons. However, there are people who argue that the planned economy is more efficient than the market economy nostalgic for the USSR - the economic model of this state had its advantages. The most developed countries of the world have long developed their economic systems according to market principles, and their current successes and achievements in economic development are the best indicator of the effectiveness of such systems. In post-Soviet countries, the market economy was born relatively recently - after the collapse of the Union, and it is still far from the classical market models, there are different reasons. At the same time, there are people who claim that the planned economy is more efficient than the market economy, as a rule, they are among the nostalgic for the USSR - the economic model of this state had its advantages.

The aim of this paper is to survey economic studies about the role of inter-firm competition and competition policies in transition economies. What effects did competition induce? What policies were implemented to facilitate transition processes? What policies can be regarded as successful and what as failure? What is the relationship between competition, productivity and innovation? The geographical focus is on the countries in Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS) that formed the Soviet Union. The review is based on a search strategy that uses Econlit and its strict quality criteria as its main source. Furthermore, publications by international institutions such as development banks and Google Scholar were used as complementary sources to reduce the academic publication bias. A total of 28 core articles were identified, of which a summary is provided in the Annex. This survey is written 25 years after the transition began, which allows covering a sufficiently long period to study the multilayered effects of competition. The experiences can be broadly structured into two phases. Most countries underwent an initial period of macro-economic disruptions and adjustments. In a second phase, a new firm base emerged that was capable to generate economic growth. Economic research questions changed accordingly. The focus shifted from ‘shock-management’ in which job-destruction dominated job-creation to the promotion of the private sector via entry and competition. While earlier articles examined competition and productivity, later research tends to analyse the effects of market competition on technology and innovation. As the transition advanced and entrepreneurial activities gained in complexity, cross-country variance in aggregate performance became obvious tilting the research agenda toward institutional economics. Since the transition process has been completed, research on the transition process itself ceased, and economic literature about the former transition countries has become part of development economics. Also the methods used changed. Earlier papers typically presented case studies of selected countries. Later articles provide international comparisons using large-scale survey data. Commonly used data are the Business Environment and Enterprise Performance Surveys fielded by European Bank for Reconstruction and Development and the World Bank.

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