Friday, October 30, 2009

Competition policy and productivity growth: An empirical assessment

Posted by D. Daniel Sokol

For those interested in competition policy and development, Paolo Buccirossi (LEAR), Lorenzo Ciari (EUI and LEAR), Tomaso Duso (Humboldt University and the WZB), Giancarlo Spagnolo (University of Rome Tor Vergata), and Cristiana Vitale (LEAR) have a new paper on Competition policy and productivity growth: An empirical assessment.  It looks interesting.

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 as measured 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 set up and antitrust activities (rather than merger control). The effect is strengthened by a good legal system, suggesting complementarities between competition policy and the efficiency of law enforcement institutions.

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