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)
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)
, 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
Dutz, M.A., Vagliasindi, M. (2000),
Competition Policy Implementation in Transition Economies: An Empirical Assessment
, European Economic Review, Vol. 44, Elsevier, Amster-dam, The Netherlands, pp. 762-772.
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.