Services reform and downstream economy-wide performance: The case of Bulgaria

•Services reform including competition in services markets in Bulgaria is measured.•These reforms in services have an effect on downstream firm performance.•Firm performance is measured in terms of Total Factor Productivity (TFP).•Both downstream goods and firms are taken into account when computing TFP.

This paper provides new evidence on the impact of services sector reforms on domestic firm productivity. It extends the previous literature on this topic by using firm-level data from Bulgaria, by developing an up-to-date TFP measure, and by taking stock of the downstream performance of the entire economy, covering goods as well as services firms. The results show that indeed services reform are an important driver for the wider downstream economy, particularly reforms in electricity, insurance and telecom. More importantly, a novel issue is that the results also show that sheer competition in services markets also forms a significant determinant for downstream firm TFP.