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Political Determinants of Competition in the Mobile Telecommunication Industry

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  • Zingales, Luigi
  • Faccio, Mara

Abstract

We study how political factors shape competition in the mobile telecommunication sector. We show that the way a government designs the rules of the game has an impact on concentration, competition, and prices. Pro-competition regulation reduces prices, but does not hurt quality of services or investments. More democratic governments tend to design more competitive rules, while more politically connected operators are able to distort the rules in their favor, restricting competition. Government intervention has large redistributive effects: U.S. consumers would gain $65bn a year if U.S. mobile service prices were in line with German ones and $44bn if they were in line with Danish ones.

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  • Zingales, Luigi & Faccio, Mara, 2017. "Political Determinants of Competition in the Mobile Telecommunication Industry," CEPR Discussion Papers 11794, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11794
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    Cited by:

    1. Philippon, Thomas & Gutierrez, German, 2018. "How EU Markets Became More Competitive Than US Markets: A Study of Institutional Drift," CEPR Discussion Papers 12983, C.E.P.R. Discussion Papers.
    2. German Gutierrez, 2018. "Investigating Global Labor and Pro t Shares," 2018 Meeting Papers 165, Society for Economic Dynamics.
    3. Leone, Fabrizio & Macchiavello, Rocco & Reed, Tristan, 2022. "Market size, markups and international price dispersion in the cement industry," LSE Research Online Documents on Economics 117954, London School of Economics and Political Science, LSE Library.
    4. Daniel Björkegren, 2017. "Scoping for: Competition in Network Industries: Evidence from Mobile Telecommunications in Rwanda," Working Papers 17-10, NET Institute.
    5. Gregoire Rota-Graziosi & Fayçal Sawadogo, 2021. "The tax burden on mobile network operators in Africa," Post-Print hal-03524787, HAL.
    6. Matias Covarrubias & Germán Gutiérrez & Thomas Philippon, 2019. "From Good to Bad Concentration? US Industries over the Past 30 Years," NBER Chapters, in: NBER Macroeconomics Annual 2019, volume 34, pages 1-46, National Bureau of Economic Research, Inc.
    7. Macchiavello, Rocco & Leone, Fabrizio & Reed, Tristan, 2021. "The Falling Price of Cement in Africa," CEPR Discussion Papers 16253, C.E.P.R. Discussion Papers.
    8. Tarna Silue, 2021. "E-money, Financial Inclusion and Mobile Money Tax in Sub-Saharan African Mobile Networks," Working Papers hal-03281898, HAL.
    9. Bastianin, Andrea & Castelnovo, Paolo & Florio, Massimo, 2018. "Evaluating regulatory reform of network industries: a survey of empirical models based on categorical proxies," Utilities Policy, Elsevier, vol. 55(C), pages 115-128.
    10. Motta, Massimo & Tarantino, Emanuele, 2021. "The effect of horizontal mergers, when firms compete in prices and investments," International Journal of Industrial Organization, Elsevier, vol. 78(C).
    11. Grégoire Rota-Graziosi & Fayçal Sawadogo, 2020. "The tax burden on mobile network operators in Africa," Working Papers hal-03109370, HAL.
    12. Tarna Silue, 2021. "E-money, Financial Inclusion and Mobile Money Tax in Sub-Saharan African Mobile Networks," CERDI Working papers hal-03281898, HAL.
    13. Brown, Jeffrey R. & Huang, Jiekun, 2020. "All the president's friends: Political access and firm value," Journal of Financial Economics, Elsevier, vol. 138(2), pages 415-431.
    14. Anqi Jiao, 2022. "A hidden hand in corporate lobbying," Financial Management, Financial Management Association International, vol. 51(2), pages 357-397, June.
    15. Montenegro, Lourdes O. & Araral, Eduardo, 2020. "Can competition-enhancing regulation bridge the quality divide in Internet provision?," Telecommunications Policy, Elsevier, vol. 44(1).
    16. Son, Pham Hai & Son, Le Hoang & Jha, Sudan & Kumar, Raghvendra & Chatterjee, Jyotir Moy, 2019. "Governing mobile Virtual Network Operators in developing countries," Utilities Policy, Elsevier, vol. 56(C), pages 169-180.
    17. Wang, Yizhong & Yao, Chengxue & Kang, Di, 2019. "Political connections and firm performance: Evidence from government officials' site visits," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    18. Germán Gutiérrez & Thomas Philippon, 2017. "Declining Competition and Investment in the U.S," NBER Working Papers 23583, National Bureau of Economic Research, Inc.
    19. Rota-Graziosi, Gregoire & Sawadogo, Fayçal, 2022. "The tax burden on mobile network operators in Africa," Telecommunications Policy, Elsevier, vol. 46(5).
    20. Rodríguez-Castelán, Carlos & Araar, Abdelkrim & Malásquez, Eduardo A. & Granguillhome Ochoa, Rogelio, 2022. "Competition reform and household welfare: A microsimulation analysis of the telecommunication sector in Ethiopia," Telecommunications Policy, Elsevier, vol. 46(2).
    21. Olimpia Cutinelli Rendina, 2023. "Lobbying or Innovation: Who Does What Against Foreign Competition," PSE Working Papers halshs-03970033, HAL.
    22. Grégoire Rota-Graziosi & Fayçal Sawadogo, 2021. "The tax burden on mobile network operators in Africa," CERDI Working papers hal-03118496, HAL.
    23. Daniel Björkegren, 2022. "Competition in network industries: Evidence from the Rwandan mobile phone network," RAND Journal of Economics, RAND Corporation, vol. 53(1), pages 200-225, March.
    24. Clò, Stefano & Florio, Massimo & Rentocchini, Francesco, 2020. "Firm ownership, quality of government and innovation: Evidence from patenting in the telecommunication industry," Research Policy, Elsevier, vol. 49(5).
    25. Yi, Shangkun & Wang, Jian & Wang, Xiaoting & Feng, Hongrui, 2022. "CEO political connection and stock sentiment beta: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).

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    More about this item

    Keywords

    Political economy; Capture; Antitrust;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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