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Liberalisation in a world of second best: evidence on European network industries


  • Ugur, Mehmet


This article reports mixed results about the impacts of liberalisation in European network industries. Telecommunications prices have fallen and converged across EU-15, but electricity and gas prices have either increased or diverged. Productivity has increased, but mainly as a result of falling employment in absolute and relative terms. Liberalised industries are still characterised by high levels of market concentration and low levels of transparency and market integration. These findings are in line with the predictions of the theory of second best and suggest that the case for liberalisation of network industries has been oversold.

Suggested Citation

  • Ugur, Mehmet, 2009. "Liberalisation in a world of second best: evidence on European network industries," MPRA Paper 17873, University Library of Munich, Germany, revised 13 Oct 2009.
  • Handle: RePEc:pra:mprapa:17873

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    References listed on IDEAS

    1. Charles Blackorby, 1990. "Economic Policy in a Second-Best Environment," Canadian Journal of Economics, Canadian Economics Association, vol. 23(4), pages 748-771, November.
    2. Bushnell, James & Mansur, Erin T., 2005. "Consumption Under Noisy Price Signals: A Study of Electricity Retail Rate Deregulation in San Diego," Staff General Research Papers Archive 13142, Iowa State University, Department of Economics.
    3. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 11-32.
    4. Reiner Martin & Moreno Roma & Isabel Vansteenkiste, 2005. "Regulatory reforms in selected EU network industries," Occasional Paper Series 28, European Central Bank.
    5. Jarrell, Gregg A, 1978. "The Demand for State Regulation of the Electric Utility Industry," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 269-295, October.
    6. Richard Lipsey, 2007. "Reflections on the general theory of second best at its golden jubilee," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 349-364, August.
    7. Carlo Fiorio & M. Florio & S. Salini & P. Ferrari, 2007. "Consumers’ Attitudes on Services of General Interest in the EU: Accessibility, Price and Quality 2000-2004," Working Papers 2007.2, Fondazione Eni Enrico Mattei.
    8. Mehmet Ugur, 2004. "(Re)theorising European Integration under Globalisation: A Political Economy Approach," European Political Economy Review, European Political Economy Infrastructure Consortium, vol. 2(Summer), pages 74-103.
    9. Martin, Reiner & Roma, Moreno & Vansteenkiste, Isabel, 2005. "Regulatory reforms in selected EU network industries," Occasional Paper Series 28, European Central Bank.
    10. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
    11. Stefan Buehler, 2005. "The Promise and Pitfalls of Restructuring Network Industries," German Economic Review, Verein für Socialpolitik, vol. 6(2), pages 205-228, May.
    12. Stephen Thomas, 2004. "Evaluating the British Model of Electricity Deregulation," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 75(3), pages 367-398, September.
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    More about this item


    Liberalisation; network industries; second-best; public policy; European Union;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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