for those services industries where sector-specific information is not available. All of the indices are available for 1998–2002. According to the EBRD, the scores “reflect the judgment of the EBRD’s Office of the Chief Economist about country-specific progress in transition.” The advantage of using these measures is that they are in principle designed to encompass all policy aspects of liberalization, both with respect to domestic and foreign providers.<sup>17</sup> However, this broad coverage comes at the cost of a limited precision, particularly with respect to the time variation of the indicators.

Therefore, we employ alternative measures aiming to capture particular aspects of services reform, namely (i) the extent to which foreign investors have entered Czech services industries; (ii) the progress of privatization in services industries; and (iii) the level of competition in services industries. These proxies offer several advantages. First, they can be measured precisely. Second, allowing foreign entry or privatizing state owned enterprises is a good indicator of a serious commitment to reform. Third, all these measures are outcomes rather than policy variables, which means that they encompass implementation as well as policies. Fourth, comparing the results for individual measures can offer insights into the relative importance of various aspects of services liberalization.

The extent of foreign presence in services sectors is measured by the share of foreign-owned providers in sectoral sales. Firm-level ownership information is available in Amadeus in the form of records on shareholders, their nationalities and their ownership shares, including the dates as of which the information is valid. The date records pertain to the latest available information in each release of Amadeus, i.e. they are not time-varying within one version of the data base. Therefore, we combine the information from four different releases of Amadeus (1998, October 2001, January 2005 and March 2005) and construct a panel of foreign ownership shares for each firm.<sup>18</sup> In cases where the date of foreign entry was ambiguous, we looked up information on the owners from other publicly available sources. This usually allowed us to eliminate any residual doubts. For the top 5 companies in each sector and year, we additionally verified any available information about foreign owners and their date of entry by looking at annual reports and information on the company websites.

Throughout the paper, we employ two definitions of foreign ownership shares: a threshold definition and a capital share definition. In the former, a firm’s entire output is counted as foreign if the sum of the shares held by foreign entities exceeds 10% (the standard threshold for defining FDI). In the latter, a firm’s output is weighted by the foreign ownership share and only this fraction is considered as foreign output. Using these two definitions, we calculate the share of foreign output at the level of 2-digit services sectors of the NACE classification for the years 1998 to 2002. In what follows, we will refer to the foreign output share variables as _foreign share_ .

We construct the _foreign share_ variables for the following services sectors: other business activities (includes legal, accounting, consulting, advertising services) (NACE code 74), computer and related activities (72), renting of machinery and equipment (71), real estate activities (70), financial intermediation (65), post and telecommunications (64), supporting and auxiliary transport activities (63), land transport (60), retail trade and repair of personal and household goods (52), wholesale trade and commission trade (51), sale, maintenance and repair of motor vehicles and retail sale of automotive fuel (50), construction (45), collection, purification and distribution of water (41), electricity, gas and hot water supply (40).<sup>19</sup> Foreign engagement in these sectors varies substantially. While in the electricity sector almost 76% of sales in 2002 came from firms with at least 10% foreign ownership, this ratio reached only 8% in land transport. There is also a significant variation across time. The average of foreign output shares more than doubled between 1998 and 2002.

The progress of privatization in services industries is measured by the share of output provided by firms with private owners. The determination of whether a particular owner is a private entity or a state or

> 17 The indices are described in more detail in Appendix F.

> 18 Note that in contrast to other releases, the January 2005 release contained ownership information relating to earlier dates which proved invaluable in constructing ownership changes taking place during the 2002-04 period.

> 19 The following services sector had to be excluded due to a small number of observations in the data: hotels and restaurants (55), water transport (61), air transport (62), insurance and pension funding (66), activities auxiliary to financial intermediation (67).

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