Monopoly and Regulation in Industrializing England: Evidence from the Infrastructure Sector

Posted by D. Daniel Sokol

Daniel E. Bogart, University of California, Irvine - Department of Economics addresses Monopoly and Regulation in Industrializing England: Evidence from the Infrastructure Sector.

ABSTRACT: The infrastructure sector poses a challenge to the view that England had open and competitive markets during its industrializing era. The British national government granted thousands of monopolies with rights to levy tolls on internal trade in the 1700s and early 1800s. This paper shows, however, that most monopoly infrastructure providers did not earn monopoly profits. Using turnpike and river navigation investments as test cases, it demonstrates that rates of return were between 3 and 5%, below the competitive rate of return. The paper also offers evidence that profits were low in part because of competition between providers. Rates of return are shown to be lower in counties with lower Herfindahl indices. The strength of competition is linked with a regulatory framework that imposed low barriers to entry in the infrastructure sector.