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Market Liberalization, Regulatory Uncertainty, and Firm Investment


  • Florian Baumann

    () (Department of Economics, Eberhard Karls University Tübingen, Germany)

  • Tim Friehe

    () (Department of Economics, University of Konstanz, Germany)


Motivated by the German postal market, this paper analyzes the effects of regulatory uncertainty about labor costs for investment into a liberalized market. We distinguish between the external investment margin (market entry) and the internal investment margin (technology) and establish that regulatory uncertainty affects these margins differently, encouraging market entry but discouraging investment at the internal margin. As a consequence, the impact of regulatory uncertainty on competition in liberalized markets is the result of these two countervailing forces.

Suggested Citation

  • Florian Baumann & Tim Friehe, 2011. "Market Liberalization, Regulatory Uncertainty, and Firm Investment," Working Paper Series of the Department of Economics, University of Konstanz 2011-08, Department of Economics, University of Konstanz.
  • Handle: RePEc:knz:dpteco:1108

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    Cited by:

    1. repec:eee:transe:v:113:y:2018:i:c:p:75-93 is not listed on IDEAS
    2. Cristian BUSU & Alexandra Cătălina NEDELCU, 2015. "Specific Features Of Postal Service Market Liberalization," SEA - Practical Application of Science, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 8, pages 291-295, June.

    More about this item


    regulatory uncertainty; investment; market entry; minimum wage;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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