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Dr. Danilo Samà - The Effectiveness of Competition Policy. An Econometric Assessment in Developed and Developing Countries

Dr. Danilo Samà - The Effectiveness of Competition Policy. An Econometric Assessment in Developed and Developing Countries

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Published by Dr. Danilo Samà
Title:
The Effectiveness of Competition Policy: An Econometric Assessment in Developed and Developing Countries

Author:
Dr. Danilo Samà

Abstract:
The ultimate objective of the present paper is to empirically investigate the effectiveness of competition policy in developed and developing countries. Although its importance is continuously increasing, the effectiveness of competition policy still seems to lack the attention that it would deserve. At the present state of art, the number of academic contributions that attempts to estimate its impact on relevant economic variables appears very limited, in particular for the less developed countries. However, an empirical literature aimed at measuring in objective terms the effect of competition policy on economic growth is emerging, starting from narrow variables of interest, such as Gross Domestic Product and Total Factor Productivity. As a result, the principal aim of the current work is to contribute to this branch of research, focusing on broader indicators of market performance, in order to understand whether the presence of an antitrust authority has a significant impact, thus an effective utility, on the level of competition of a country.

Keywords:
Competition Authorities, Competition Policy, Developed Countries, Developing Countries, Economic Development, Economic Growth, Law & Economics, Market Concentration, Market Efficiency, Market Performance, New Institutional Economics, Political Economy

JEL Classification:
C21; C26; K21; L40

Year:
2013
Title:
The Effectiveness of Competition Policy: An Econometric Assessment in Developed and Developing Countries

Author:
Dr. Danilo Samà

Abstract:
The ultimate objective of the present paper is to empirically investigate the effectiveness of competition policy in developed and developing countries. Although its importance is continuously increasing, the effectiveness of competition policy still seems to lack the attention that it would deserve. At the present state of art, the number of academic contributions that attempts to estimate its impact on relevant economic variables appears very limited, in particular for the less developed countries. However, an empirical literature aimed at measuring in objective terms the effect of competition policy on economic growth is emerging, starting from narrow variables of interest, such as Gross Domestic Product and Total Factor Productivity. As a result, the principal aim of the current work is to contribute to this branch of research, focusing on broader indicators of market performance, in order to understand whether the presence of an antitrust authority has a significant impact, thus an effective utility, on the level of competition of a country.

Keywords:
Competition Authorities, Competition Policy, Developed Countries, Developing Countries, Economic Development, Economic Growth, Law & Economics, Market Concentration, Market Efficiency, Market Performance, New Institutional Economics, Political Economy

JEL Classification:
C21; C26; K21; L40

Year:
2013

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Published by: Dr. Danilo Samà on Apr 15, 2014
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The Effectiveness of Competition Policy:An Econometric Assessmentin Developed and Developing Countries
 
Danilo Sam`a
LUISS “Guido Carli” University of Rome2013
Abstract
The ultimate objective of the present paper is to empirically investigate the effectivenessof competition policy in developed and developing countries. Although its importanceis continuously increasing, the effectiveness of competition policy still seems to lack theattention that it would deserve. At the present state of art, the number of academic con-tributions that attempts to estimate its impact on relevant economic variables appearsvery limited, in particular for the less developed countries. However, an empirical litera-ture aimed at measuring in objective terms the effect of competition policy on economicgrowth is emerging, starting from narrow variables of interest, such as Gross DomesticProduct and Total Factor Productivity. As a result, the principal aim of the currentwork is to contribute to this branch of research, focusing on broader indicators of marketperformance, in order to understand whether the presence of an antitrust authority has asignificant impact, thus an effective utility, on the level of competition of a country.
Keywords:
 Competition Authorities, Competition Policy, Developed Countries, Devel-oping Countries, Economic Development, Economic Growth, Law & Economics, MarketConcentration, Market Efficiency, Market Performance, New Institutional Economics, Po-litical Economy.
JEL Classification:
 C21; C26; K21; L40
The present paper was prepared during a visiting period at the Toulouse School of Economics (France). Theauthor, who remains the only responsible for the views expressed, would like to thank Prof. Roberto Pardolesi,Prof. Giuseppe Ragusa, Prof. Paul Seabright, Prof. Priscila Souza and Dr. Giacomo Luchetta for the kindcomments and suggestions offered and Prof. Stefan Voigt for the access to the dataset hereby indicated as Voigt(2009). The dataset built for the purposes of the current work is available upon request.
Ph.D. Candidate and Researcher in Economic Analysis of Competition Law and Law & Economics LABResearch Fellow at LUISS “Guido Carli” University of Rome, Faculty of Economics, Viale Romania 32, 00197Rome (Italy) (E-Mail: ds@danilosama.com - Web-Site: www.danilosama.com).
 
This was one of the best things about Lennon and McCartney,the competitive element within the team. It was great. But hard to live with 
.
Paul McCartney
1 Research Proposal
The ultimate objective of the present paper is to investigate empirically the effec-tiveness of competition policy in developed and developing countries. Although itsimportance is continuously increasing, competition policy still seems to lack theattention it would deserve. At the present state of art, the number of academiccontributions that attempts to estimate its impact on relevant economic variablesappears very limited, in particular for the less developed countries. However, anempirical literature aimed at measuring in objective terms the effect of competitionpolicy on economic growth is emerging, starting from narrow variables of interest,such as Gross Domestic Product (GDP) and Total Factor Productivity (TFP).As a result, the principal aim of the current work is to contribute to this branchof research, focusing on broader indicators of market performance, in order to un-derstand whether the presence of an antitrust authority has a significant impact,thus an effective utility, on the level of competition of a country. In other terms,the research question behind the current work is rather straightforward: is a com-petition authority active in a developed or developing country able to implementeffectively its primary role? If not, which are the institutional functions and powersthat should be strengthened?From a policy perspective, the aim of the present paper is also to comprehendwhether the enforcement of a competition policy regime in a developing countryhas the same beneficial effects on the intensity of competition usually claimed bythe most developed countries. At the same time, it may be understood whetherindustrial and institutional differences jeopardizes the effectiveness of a such tool of political economy, so much that in emerging countries it would be more worth toassign funds and priority to other tools of economic development.1
 
2 Literature Review
According to the mainstream economic school of thought, competition is the criticalprocess for a market economy to ensure the optimal allocation of resources and thehighest level of social welfare. As it is common knowledge, in fact, competitive mar-kets enable consumers to purchase better products at lower prices and incentivizefirms to improve the quality of the goods and services offered. However, notwith-standing its natural benefits, the functioning of competition is not automatic butmust be sustained through an intervention by the state, which normally occurs withthe adoption of a competition legislation and the creation of a competition authoritypredisposed to the role of promoter of market democracy. Nevertheless, despite thegeneral consensus, at least from a theoretical standpoint, on the necessity of foster-ing competition in order to support economic efficiency and fairness on the markets,what appears extremely surprising is the almost absence of academic contributionstrying to assess empirically the effectiveness of competition policy. In the presentsection, therefore, we provide a brief and exhaustive overview of the rather few re-sults obtained in the empirical literature.Dutz and Vagliasindi (2000)
1
are the first to overtake the traditional and subjec-tive indicators typical of the previous literature, which was limited to an evaluationof the competition legislations as “in the books”. The authors, in fact, exploitingcross-sectional data and looking at the actual practice in 18 transition countries,measure the effectiveness of the different competition policy regimes according tothree criteria (i.e. 1. enforcement; 2. competition advocacy; 3. institutional effec-tiveness). The main result is a positive impact of competition policy on the intensityof competition, the latter as captured by an indicator of economy-wide enterprisemobility. However, the essential drawback of the study remains the low number of countries for which data are available.Krakowski (2005)
2
, after a regression analysis for a sample of 101 countries,reaches two main conclusions: firstly, the experience of the competition authorityand the institutional quality of the government explain a substantial part of the
1
Dutz, M.A., Vagliasindi, M. (2000),
 Competition Policy Implementation in Transition Economies: An Empirical Assessmen
, European Economic Review, Vol. 44, Elsevier, Amster-dam, The Netherlands, pp. 762-772.
2
Krakowski, M. (2005),
 Competition Policy Works: The Effect of Competition Policy on the Intensity of Competition. An International Cross-Country Comparison 
, Hamburg Institute of International Economics, Discussion Paper No. 332, Hamburg, Germany, pp. 1-18.
2

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