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How EU Markets Became More Competitive Than US Markets: A Study of Institutional Drift

Author

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  • Germán Gutiérrez
  • Thomas Philippon

Abstract

Many European markets today appear more competitive than their American counterparts. We document this surprising reversal of history and propose an explanation. Our model of political support predicts that a supranational regulator enforces free markets beyond the preferences of any individual country. We find that 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. Our model also explains why political and lobbying expenditures have increased more in America than in Europe.

Suggested Citation

  • Germán Gutiérrez & Thomas Philippon, 2018. "How EU Markets Became More Competitive Than US Markets: A Study of Institutional Drift," NBER Working Papers 24700, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24700
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    Citations

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    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. 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 National Bureau of Economic Research, Inc.
    4. repec:kap:revind:v:54:y:2019:i:4:d:10.1007_s11151-019-09688-4 is not listed on IDEAS
    5. 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).
    6. repec:wfo:monber:y:2018:i:12:p:871-880 is not listed on IDEAS
    7. 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.
    8. Díez, Federico & Fan, Jiayue & Villegas-Sanchez, Carolina, 2019. "Global Declining Competition," CEPR Discussion Papers 13696, C.E.P.R. Discussion Papers.
    9. 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.
    10. 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.
    11. 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

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