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The Effectiveness of Competition Policy and the Price-Cost Margin: Evidence from Panel Data

Author

Listed:
  • Patrick McCloughan

    () (Indecon International Economic Consultants)

  • Seán Lyons

    (Economic and Social Research Institute (ESRI))

  • William Batt

    (London Economics)

Abstract

This paper presents robust panel data econometric evidence suggesting that more effective competition policy curtails the exercise of market power because countries in which competition policy is judged to be more effective are characterised by lower market price-cost margins, controlling for other factors, including market growth, import penetration and spare capacity. The measure of competition policy effectiveness incorporated into our analysis is the annual survey-based ratings of national competition authorities (NCAs) produced by Global Competition Review (GCR). Our findings imply a role for competition in enhancing economic competitiveness and that government should continue to support NCAs in enforcing competition policy.

Suggested Citation

  • Patrick McCloughan & Seán Lyons & William Batt, 2007. "The Effectiveness of Competition Policy and the Price-Cost Margin: Evidence from Panel Data," Papers WP209, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:wp209
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    File URL: http://www.esri.ie/pubs/WP209.pdf
    File Function: First version, 2007
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    References listed on IDEAS

    as
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    Cited by:

    1. Jürgen Janger, 2008. "Supply-Side Triggers for Inflation in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 34-69.
    2. Russell Pittman, 2009. "Who Are You Calling Irrational? Marginal Costs, Variable Costs, and the Pricing Practices of Firms," EAG Discussions Papers 200903, Department of Justice, Antitrust Division.

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