Papers and Publications on the Political-Economic Effects of Competition Law & Policy
 
Research is underway on the following papers, which examine the economic and political effects of competition law and policy:
 
Does Competition Law and Policy Boost Innovation?
 
Tim Büthe and Cindy Y. Cheng.  "The Effect of Competition Law on Innovation: A Cross-National Statistical Analysis."  Paper presented at the Inaugural Conference of the World Bank-OECD Global Expert Network on Competition Policy, Shared Prosperity and Growth, Washington, 23 June 2015.
Innovation leads to greater diversity of products, higher product quality, and/or lower costs of production and thus has been widely recognized as a key driver of economic growth.  Political economists have long seen innovation, or more precisely the incentive to innovate, as a key benefit of the competition that is a hallmark of a market economy.  Accordingly, creating and maintaining this incentive to innovate is a central economic rationale for adopting and maintaining antitrust or competition laws and policies.  Empirical analyses of the effect of competition law and policy on innovation, however, are scarce, almost all based on U.S. data, and yield mixed results.  This paper examines the relationship between competition law and innovation in cross-sectional and panel analyses for a large number of jurisdictions, including (in joint and separate analyses) OECD countries as well as a large sample of developing countries.  Employing better data on compettion law adoption for all independent countries and autonomous jurisdictions, as well as two innovative ways of measuring innovation in a cross-nationally comparable manner, we find that the adoption of competition laws indeed has a strongly statistically significant and positive effect on the rate of innovation cross-nationally and over time.
 
 
The Effect of Competition Law and Policy on the Competitiveness of Markets
 
Sophia Staal and Tim Büthe.  "The Effectiveness of 2010/2011 Competition Policy Reform in Kenya: A Political-Economic Assessment."  Manuscript for a journal article (work in progress), Duke University, 2015.
In many developing countries, the promise of competition policy is called into question by poorly defined property rights, weak contract enforcement, underdeveloped markets, political manipulation of markets, corruption, and a host of other factors.  Some have therefore questioned whether competition law and policy holds much of any promise for poorer countries' economic (or political or human) development before those countries have addressed a broad range of political, economic, and legal impediments to economic growth and other desirable developments.  We challenge such claims theoretically by noting that several of the most severe problems that make markets not work well in many developing countries are exactly the problems competition policy is supposed to address: high barriers to entry; locally and sub-nationally highly concentrated ownership of channels of distribution, which fragment markets geographically; concentrated economic power used to perpetuate both political privilege and vast inequities of economic opportunity.  Competition policy may therefore be particularly important in poor developing countries.  We challenge such claims empirically by examining the effectiveness of recent reforms of competition law and policy in Kenya.
While clearly a low-income developing country, Kenya is the 5th most populous sub-Saharan African country, has the largest East African economy, and is a regional hub for trade and finance.  It also is often seen as a test case for the viability or effectiveness of policies intended to foster political and economic development.  Kenya thus is both intrinsically important and likely representative of the promise and limitations of competition law and policies in many other developing countries.  Its competition policy, however, has received very limited attention, even though the lack of competition has long been noted as a serious impediment to the efficient operation of markets in Kenya, suggesting that a suitable designed and enforced competition law would hold real promise.  Major changes in 2010/2011 transformed Kenya from a country with a poorly designed and weakly implemented competition regime to a country with a well-designed competition law and sufficient political commitment to implement it.  In this paper, we focus on the economic consequences of these competition law/policy reform in industries that, prior to the 2011 reform, had been repeatedly identified as suffering from lack of competition. Given how recent the reforms have been, the analysis is necessarily preliminary and not entirely conclusive, but we find surprisingly strong evidence in our analyses of the Kenyan political economy that the 2010/11 reforms have indeed been consequential.
 
Tim Büthe.  "Does Competition Law Foster Market Competition?"  Manuscript for a journal article, Duke University, 2015.
This paper, which is still at the conceptual stages, aims to re-assess arguments about the effect of competition law on the level of market competition across the broad range of countries that have in recent decades adopted competition laws (see the papers on the global diffusion of antitrust/competition law and policy), using the new, better data from the Data Project.
 
Competition Advocacy as an Anti-Rent-Seeking Policy?
 
Tim Büthe and Rachel Glanz.  "States and Markets:  Competition Advocacy as an Anti-Rent-Seeking Policy"  Manuscript for a journal article, Duke University, September 2015.
Competition policy seeks to encourage and safeguard competition in markets by controlling economic power and preventing or mitigating its abuse.  The OECD, the World Bank, and numerous others have in recent years increasingly recommended that the often young, political weak competition agencies in developing countries focus more of their efforts on competition advocacy—defined by the International Competition Network (ICN) in 2002 as the "promotion of a competitive environment for economic activities by means of non-enforcement mechanisms, mainly through [a competition agency's] relationship with other governmental entities and by increasing public awareness [of] the benefits of competition"—rather than focusing all their efforts on traditional law enforcement.  A key objective of such an advocacy role is to establish within the government a vocal promoter of competition principles to balance ministries or agencies with particularistic agendas, which often propose anti-competitive laws or regulations in response to lobbying by rent-seeking private actors.  As the ICN put it: "By having a competition advocacy role, the agency can counter or at least minimize the adverse effects of rent-seeking behavior," which they identify as a "prevalent" problem in many countries (2002:25).
Although the theoretical case for competition advocacy as an anti-rent-seeking policy (which we clarify with a simple model) is strong, empirical work has been in short supply.  This paper provides what we believe is the first systematic empirical analysis of competition advocacy as an anti-rent-seeking policy.  To do so, we take advantage of questions from the World Bank enterprise surveys, which asked respondents about the lobbying practices of their own firm and other firms in their industry vis-a-vis government officials and legislators.  The responses to these survey questions provide an exceptionally direct measure of the level of rent-seeking activity.  They enable us to undertake two sets of analyses.  Across the developing and transition economies where these questions were asked in the World Bank surveys, we find that firms in countries with competition regimes that put more emphasis on advocacy work generally consider rent-seeking less effective.  Turning to within-country analysis (over time), we identify a country that substantially strengthted its competition agency's advocacy powers between a first World Bank survey that asked the rent-seeking questions and subsequent survey that asked the same questions again.  We show that this greater advocacy role resulted in a substantial, as well as statistically significant, decline in the level of rent-seeking.
An earlier version of this paper was presented at the Annual Meeting of the American Political Science Association, San Francisco, 5 September 2015 under the title "Competition Policy in Developing Countries: Competition Advocacy as an Anti-Rent-Seeking Policy?"  See also the companion paper about competition advocacy in Ukraine (Glanz and Büthe 2015) among the research on Competition Law and Policy in Developing Countries.
 

 

 

 

 

 

 

 

< page last updated 5 September 2015 >