Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Friday, May 14, 2010

Competition Policy and Productivity Growth: An Empirical Assessment

Posted by D. Daniel Sokol

Paolo Buccirossi (LEAR), Lorenzo Ciari (LEAR and EUI), Tomaso Duso (Humboldt University Berlin and WZB), Giancarlo Spagnolo (University of Rome Tor Vergata SITE, EIEF, CEPR), and Cristiana Vitale (LEAR) have an interesting paper on Competition Policy and Productivity Growth: An Empirical Assessment.

ABSTRACT: This paper empirically investigates the effectiveness of competition policy by estimating its impact on Total Factor Productivity (TFP) growth for 22 industries in 12 OECD countries over the period 1995-2005. We find a robust positive and significant effect of competition policy asmeasured by newly created indexes. We provide several arguments and results based on instrumental variables estimators as well as non-linearities to support the claim that the established link can be interpreted in a causal way. At a disaggregated level, the effect on TFP growth is particularly strong for specific aspects of competition policy related to its institutional setup and antitrust activities (rather than merger control). The effect is strengthened by good legal systems, suggesting complementarities between competition policy and the efficiency of law enforcement institutions.

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