PRODUCTIVITY GROWTH AND COMPETITION IN TUNISIAN MANUFACTURING FIRMS

This paper aims at measuring the impact of competition on productivity growth of the Tunisian manufacturing sector at the firm level. To investigate the impact of competition on productivity we use two procedures. The first one is a two-step procedure; the second one is a one step procedure. We test the robustness of our results to different methodology and to different measures of competition both at the firm level and at the industry level. We use firm data over the period 1997-2002 from Tunisian manufacturing sector, a developing country that has experienced significant liberalization reforms since 1986 to examine the possible impact of competition on TFP. We also use industry-level data over the period 1983-2007 to explore the competition process in Tunisian manufacturing sector. Our results suggest that, at low competition level, more competition raises TFP at the firm level. Competition policies provide sufficient incentives to increase productivity growth at firm level. Yet, with high levels of competition, a rise in competition has a negative impact on productivity, the Schumpeterian effect appears and the capacity of firm to innovate decreases. Policies that promoted competition could be appropriate. But, to gain from competition, even at a high level of competition, Tunisian authorities must sustain firms to be more innovative.