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Service Oligopolies And Australia'S Economy-Wide Performance

Listed author(s):
  • 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, while the newly privatised ones, utilities, telecommunications, finance and transport, supply a fifth. 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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File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2017-02/5_tyers_rees_2008.pdf
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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
Handle: RePEc:een:camaaa:2008-05
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