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Service Oligopolies And Australia'S Economy-Wide Performance

  • Rod Tyers

    ()

  • Lucy Rees

The retreat from public ownership of service firms and industries has left behind numerous private monopolies and oligopolies supervised by regulatory agencies. Services industries in government and private ownership generate two-thirds of Australia’s value added and employ three quarters of its workforce. This study offers an economy-wide approach that represents monopoly and oligopoly behaviour explicitly. It examines the implications of oligopoly rents for factor markets and the real exchange rate, the extent of sectoral interactions and the potential economy wide gains from tighter price cap regulation, with the results confirming the merit of an economy-wide approach. External shocks, like the present “China boom”, are also simulated. Such positive shocks are shown to expand the potential for oligopoly rents and therefore to raise the bar for regulatory agencies. Moreover, less than tight price caps are shown to exacerbate entry-exit hysteresis in boom and bust cycles.

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Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2008-05.

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Length: 48 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:een:camaaa:2008-05
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  1. Xavier, Patrick, 1995. "Price cap regulation for telecommunications: How has it performed in practice?," Telecommunications Policy, Elsevier, vol. 19(8), pages 599-617, November.
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  13. Cabral, Luis M B & Riordan, Michael H, 1989. "Incentives for Cost Reduction under Price Cap Regulation," Journal of Regulatory Economics, Springer, vol. 1(2), pages 93-102, June.
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  17. Leon Courville, 1974. "Regulation and Efficiency in the Electric Utility Industry," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 53-74, Spring.
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  19. Dowrick, S., 1992. "Enterprise Bargaining, Union Structure and Wages," Papers 242, Australian National University - Department of Economics.
  20. Don, H. & Gunasekera, B. H. & Tyers, Rod, 1990. "Imperfect competition and returns to scale in a newly industrialising economy : A general equilibrium analysis of Korean trade policy," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 223-247, November.
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