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Competition Reform and Household Welfare : A Microsimulation Analysis of the Telecommunication Sector in Ethiopia

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  • Rodriguez Castelan,Carlos
  • Malasquez Carbonel,Eduardo Alonso
  • Granguillhome Ochoa,Rogelio
  • Araar,Abdelkrim

Abstract

This paper presents a novel method for estimating the likely welfare effects of competition reforms for both current and new consumers. Using household budget survey data from 2015/16 for Ethiopia and assuming a reform scenario that dilutes the market share of the telecommunications state-owned monopoly to 45 percent, the model predicts a 25.3 percent reduction in the price of mobile services and an increase of 4.6 million new users of mobile phone services. This reform is expected to generate a welfare gain of 1.37 percent among all consumers. Poverty rates are expected to decline by 0.31 percentage point, driven by a reduction of 0.22 percentage point for current consumers and 0.09 percentage point among new users. Inequality would increase by 0.23 Gini point since better-off consumers are more likely to reap the benefits of greater competition. This method represents a powerful tool for supporting the analysis of competition reforms in developing countries, particularly in sectors known for excluding significant segments of the population due to high consumer prices.

Suggested Citation

  • Rodriguez Castelan,Carlos & Malasquez Carbonel,Eduardo Alonso & Granguillhome Ochoa,Rogelio & Araar,Abdelkrim, 2021. "Competition Reform and Household Welfare : A Microsimulation Analysis of the Telecommunication Sector in Ethiopia," Policy Research Working Paper Series 9516, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9516
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    1. Granguillhome Ochoa, Rogelio & Lach, Samantha & Masaki, Takaaki & Rodríguez-Castelán, Carlos, 2022. "Mobile internet adoption in West Africa," Technology in Society, Elsevier, vol. 68(C).

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    More about this item

    Keywords

    Inequality; ICT Economics; Telecommunications Infrastructure; Information Technology;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • N77 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Africa; Oceania

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