Rule of Law and Large Firms Concentration in Southeast Europe
Rule of Law and Large Firms Concentration in Southeast Europe

Summary/Abstract: The purpose of this paper is to provide empirical evidence on regularities concerning the relationship between the rule of law and economic concentration. We use panel data on the largest companies in ten countries in Southeast Europe between 2009 and 2021 to assess the impact of the rule of law on aggregate concentration, that is, the share of the largest companies in total economic activity. Using fixed-effects panel models and an instrumental variables approach, we find that improvements in the rule of law are associated with greater economic concentration. This finding is consistent with previous research on institutional development and firms' performance in Eastern Europe. It suggests that improvements in the rule of law benefit existing export oriented companies and that policy efforts should be focused on smaller, start-up firms.

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