IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/24700.html
   My bibliography  Save this paper

How European Markets Became Free: A Study of Institutional Drift

Author

Listed:
  • Germán Gutiérrez
  • Thomas Philippon

Abstract

Over the past twenty years, Europe has deregulated many industries, protected consumer welfare, and created strongly independent regulators. These policies represent a stark departure from historical traditions in continental Europe. How and why did this turnaround happen? We build a political economy model of market regulation and we compare the design of national and supra-national regulators. We show that countries in a single market willingly promote a supranational regulator that enforces free markets beyond the preferences of any individual country. We test and confirm the predictions of the model. European institutions are indeed more independent and enforce competition more strongly than any individual country ever did. Countries with ex-ante weaker institutions benefit more from the delegation of competition policy to the EU level.

Suggested Citation

  • Germán Gutiérrez & Thomas Philippon, 2018. "How European Markets Became Free: A Study of Institutional Drift," NBER Working Papers 24700, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24700
    Note: EFG IO LE POL
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w24700.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alessandra Bonfiglioli & Rosario Crinò & Gino Gancia, 2019. "Concentration in International Markets: Evidence from US Imports," Working Papers 883, Queen Mary University of London, School of Economics and Finance.
    2. Campos, Nauro F., 2019. "B for Brexit: A Survey of the Economics Academic Literature," IZA Discussion Papers 12134, Institute of Labor Economics (IZA).
    3. Vanessa Alviarez & Keith Head & Thierry Mayer, 2020. "Global giants and local stars: How changes in brand ownership affect competition," Sciences Po Economics Discussion Papers 2020-04, Sciences Po Departement of Economics.
    4. Joze Damijan & Jozef Konings & Aigerim Yergabulova, 2020. "Increasing market power in Slovenia: Role of diverging trends between exporters and non‐exporters," The World Economy, Wiley Blackwell, vol. 43(5), pages 1327-1345, May.
    5. Michael Böheim & Werner Hölzl & Agnes Kügler, 2018. "Wettbewerbs- und regulierungspolitische Herausforderungen der Digitalisierung. Auf dem Weg zu einer "Sozialen Marktwirtschaft 4.0"," WIFO Monatsberichte (monthly reports), WIFO, vol. 91(12), pages 871-880, December.
    6. Campos, Nauro F. & Eichenauer, Vera Z. & Sturm, Jan-Egbert, 2020. "Close encounters of the European kind: Economic integration, sectoral heterogeneity and structural reforms," European Economic Review, Elsevier, vol. 129(C).
    7. Anderton, Robert & Jarvis, Valerie & Labhard, Vincent & Morgan, Julian & Petroulakis, Filippos & Vivian, Lara, 2020. "Virtually everywhere? Digitalisation and the euro area and EU economies," Occasional Paper Series 244, European Central Bank.
    8. Harro van Heuvelen & Leon Bettendorf & Gerdien Meijerink, 2020. "Markups in a dual labour market: the case of the Netherlands," CPB Discussion Paper 410.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    9. McAdam, Peter & Petroulakis, Filippos & Vansteenkiste, Isabel & Cavalleri, Maria Chiara & Eliet, Alice & Soares, Ana, 2019. "Concentration, market power and dynamism in the euro area," Working Paper Series 2253, European Central Bank.
    10. Matias Covarrubias & Germán Gutiérrez & Thomas Philippon, 2019. "From Good to Bad Concentration? U.S. Industries over the Past 30 Years," NBER Chapters, in: NBER Macroeconomics Annual 2019, volume 34, pages 1-46, National Bureau of Economic Research, Inc.
    11. Alexander Schiersch & Caroline Stiel, 2020. "Testing the Superstar Firm Hypothesis," Discussion Papers of DIW Berlin 1849, DIW Berlin, German Institute for Economic Research.
    12. A. Douglas Melamed & Nicolas Petit, 2019. "The Misguided Assault on the Consumer Welfare Standard in the Age of Platform Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(4), pages 741-774, June.
    13. Dohse, Dirk & Felbermayr, Gabriel & Görg, Holger & Kooths, Stefan & Lechthaler, Wolfgang & Trebesch, Christoph, 2019. "Zeit für eine neue Industriepolitik? Positionspapier des Kieler Instituts für Weltwirtschaft (IfW) zum Entwurf einer Nationalen Industriestrategie 2030," Kiel Policy Brief 122, Kiel Institute for the World Economy (IfW).
    14. Yuichiro Matsumoto, 2018. "Endogenous Sunk Cost, Scale Economies, and Market Concentration," Discussion Papers in Economics and Business 18-20, Osaka University, Graduate School of Economics.
    15. Federico J Diez & Jiayue Fan & Carolina Villegas-Sánchez, 2019. "Global Declining Competition," IMF Working Papers 2019/082, International Monetary Fund.
    16. Díez, Federico & Fan, Jiayue & Villegas-Sanchez, Carolina, 2019. "Global Declining Competition," CEPR Discussion Papers 13696, C.E.P.R. Discussion Papers.
    17. Louis Rouanet, 0. "Competition is (still) a tough weed: A review essay of Thomas Philippon’s The great reversal: How America gave up on free markets," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 0, pages 1-14.
    18. Sara L. McGaughey & Pascalis Raimondos, 2019. "Shifting MNE taxation from national to global profits: A radical reform long overdue," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(9), pages 1668-1683, December.
    19. Jesus Fernandez-Villaverde & Lee Ohanian, 2018. "The Lack of European Productivity Growth: Causes and Lessons for the U.S," PIER Working Paper Archive 18-024, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 07 Sep 2018.
    20. Aquilante, Tommaso & Chowla, Shiv & Dacic, Nikola & Haldane, Andrew & Masolo, Riccardo & Schneider, Patrick & Seneca, Martin & Tatomir, Srdan, 2019. "Market power and monetary policy," Bank of England working papers 798, Bank of England.

    More about this item

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L0 - Industrial Organization - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:24700. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.