OECD Economics Department Working Papers

ISSN :
1815-1973 (online)
DOI :
10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

 

Enhancing Competition and the Business Environment in Hungary You or your institution have access to this content

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Author(s):
Alvaro Pina1
Author Affiliations
  • 1: OECD, France

Publication Date
04 June 2014
Bibliographic information
No.:
1123
Pages
32
DOI
10.1787/5jz2pwfr0nzq-en

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Over the past decade, the growth potential of the Hungarian economy has declined substantially. Trend productivity has ceased to increase, and investment has fallen to historically low levels. To an important extent, the explanation lies in a business environment characterised by high administrative burdens, regulatory volatility, barriers to growth of small and medium-sized enterprises (SMEs) and entrepreneurship, and limited competition in major non-tradable sectors, problems which have sometimes become worse in recent years. Under these conditions, many SMEs find it hard to leave semi-informality and grow. Large multinational firms operating in manufacturing often have supplier networks weakly anchored in Hungary, while those in the non-tradable sectors sometimes face little competitive pressure; in both cases, positive spillovers to the domestic economy remain limited.

Steps should be taken both at the economy-wide level and in specific sectors to increase investment and restore productivity growth. Such measures must include fostering greater regulatory stability, inter alia by reducing the flow of new regulation and improving its quality, not least in taxation. Investor confidence would benefit from promoting trust and transparency in public institutions. Apart from vigorous competition enforcement across the economy, it is essential to remove sector-specific obstacles to competition, such as barriers to entry of different types, lock-in effects and distortive regulated prices, in retail, professional services, energy, and telecommunications. This Working Paper relates to the 2014 OECD Economic Survey of Hungary (www.oecd.org/eco/surveys/economic-survey-hungary.htm).

Keywords:
productivity, institutional quality, special taxes, Hungary, SMEs, competition enforcement, administrative burdens, business environment, barriers to entry, regulated prices
JEL Classification:
  • H2: Public Economics / Taxation, Subsidies, and Revenue
  • K2: Law and Economics / Regulation and Business Law
  • L4: Industrial Organization / Antitrust Issues and Policies
  • L8: Industrial Organization / Industry Studies: Services
  • L9: Industrial Organization / Industry Studies: Transportation and Utilities