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Competition and Productivity Growth: The Case of the U.S. Telephone Industry

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  • Gort, Michael
  • Sung, Nakil

Abstract

The article focuses on the relation of competition to changes in productivity. Specifically, it compares the experience of AT&T Long Lines, operating in an increasingly competitive market, with that of eight local telephone monopolies. Both the estimation of total factor productivity growth and the analysis of shifts in cost functions show a markedly faster change in efficiency in the effectively competitive market than for the local monopolies. The article also examines three channels through which competition produces differential changes in efficiency. The results support, by implication, a policy of permitting entry and increasing competition in local telephone markets. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Gort, Michael & Sung, Nakil, 1999. "Competition and Productivity Growth: The Case of the U.S. Telephone Industry," Economic Inquiry, Western Economic Association International, vol. 37(4), pages 678-691, October.
  • Handle: RePEc:oup:ecinqu:v:37:y:1999:i:4:p:678-91
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    Cited by:

    1. Azzeddine Azzam & Rigoberto Lopez & Elena Lopez, 2004. "Imperfect Competition and Total Factor Productivity Growth," Journal of Productivity Analysis, Springer, vol. 22(3), pages 173-184, November.
    2. Elena Podrecca, 2013. "Riforme del mercato dei prodotti e crescita della produttività. Teoria ed evidenza empirica," ECONOMIA E SOCIET REGIONALE, FrancoAngeli Editore, vol. 2013(2), pages 10-41.
    3. Alexandra Groß-Schuler & Jürgen Weigand, 2001. "Sunk Costs, Managerial Incentives and Firm Productivity," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(2), pages 275-287.
    4. Azzeddine M. Azzam & Elena Lopez & Rigoberto A. Lopez, 2002. "Imperfect Competition and Total Factor Productivity Growth in U.S. Food Processing," Food Marketing Policy Center Research Reports 068, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    5. Gary Madden & Scott J. Savage & Jason Ng, 2003. "Asia–Pacific Telecommunications Liberalisation and Productivity Performance," Australian Economic Papers, Wiley Blackwell, vol. 42(1), pages 91-102, March.
    6. Young Bong Chang & Vijay Gurbaxani, 2013. "An Empirical Analysis of Technical Efficiency: The Role of IT Intensity and Competition," Information Systems Research, INFORMS, vol. 24(3), pages 561-578, September.
    7. Ting-Kun Liu, 2011. "Local Monopoly, Network Effects And Technical Efficiency €“ Evidence From Taiwan’S Natural Gas Industry," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 5(1), pages 55-63.
    8. Bouras, Hela & Fekih, Bouthaina Soussi, 2013. "Quality institutional reform and economic performance: Case of telecommunications in the MENA region," MPRA Paper 55888, University Library of Munich, Germany.
    9. Futoshi Kurokawa & Kiyohiko G. Nishimura, 2006. "Productivity in Information Service Industries: a Panel Analysis of Japanese Firms," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 351-371.
    10. Holmes, Thomas J. & Jr., James A. Schmitz, 2001. "A gain from trade: From unproductive to productive entrepreneurship," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 417-446, April.
    11. Nemoto, Jiro & Asai, Sumiko, 2002. "Scale economies, technical change and productivity growth in Japanese local telecommunications services," Japan and the World Economy, Elsevier, vol. 14(3), pages 305-320, August.
    12. Shilin Zheng & Xinzhu Zhang, 2013. "The effect of the Chinese telecommunications reform on industrial growth: 1994–2007," Chapters, in: Michael Faure & Xinzhu Zhang (ed.),The Chinese Anti-Monopoly Law, chapter 7, pages 233-261, Edward Elgar Publishing.
    13. Munisamy Gopinath & Daniel Pick & Yonghai Li, 2004. "An empirical analysis of productivity growth and industrial concentration in us manufacturing," Applied Economics, Taylor & Francis Journals, vol. 36(1), pages 1-7.
    14. Martin Carree & André van Stel & Roy Thurik & Sander Wennekers, 2000. "Business Ownership and Economic Growth in 23 OECD Countries," Tinbergen Institute Discussion Papers 00-001/3, Tinbergen Institute.
    15. Gopinath, Munisamy & Pick, Daniel H. & Li, Yonghai, 2002. "Does Industrial Concentration Raise Productivity In Food Industries?," 2002 Annual Meeting, July 28-31, 2002, Long Beach, California 36634, Western Agricultural Economics Association.
    16. Joshua Drucker, 2009. "Trends in Regional Industrial Concentration in the United States," Working Papers 09-06, Center for Economic Studies, U.S. Census Bureau.

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