Macroeconomic Effects of Deregulation in Goods Market with Heterogeneous Firms
AbstractThis paper builds on the Blanchard and Giavazzi (2003) model of deregulation. We concentrate on product market to construct a framework explaining in a more nuanced way the redistributive effects of deregulation between sectors and within the same sector, and possible oppositions to this policy by firms and workers. In a general equilibrium framework, we introduce two sectors(regulated and unregulated), heterogeneity in firms' productivity, and a…fixed cost of entry. In such a context effects of deregulation policies can be ambiguous depending on some parametric restrictions, and sometime counterproductive. As a result, deregulation policies are not always welfare improving: a deregulation action will succeed in increasing competition and reducing mark up when the economy is already partially deregulated (sufficiently high level of competition), but may achieve the opposite outcome when it is highly regulated. Additionally, we study the choice of the best policy instrument and the optimal sequencing in the use of instruments.
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Length: 18 pages
Date of creation: 25 Dec 2005
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Find related papers by JEL classification:
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-01 (All new papers)
- NEP-COM-2006-01-01 (Industrial Competition)
- NEP-MAC-2006-01-01 (Macroeconomics)
- NEP-REG-2006-01-01 (Regulation)
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