DP3777 Imports, Entry and Competition Law as Market Disciplines
|Author(s):||Bernard Hoekman, Hiau Looi Kee|
|Publication Date:||February 2003|
|Keyword(s):||competition law, domestic entry, import penetration, industry markup|
|JEL(s):||F12, F13, L11|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3777|
Since the early 1990s, numerous countries have adopted or strengthened competition legislation. In this Paper we investigate the impact of competition law on industry markups over time and across a large number of countries. We find both domestic and foreign competition to be major sources of market discipline in concentrated markets, but that the direct effect of competition law is insignificant. Once allowance is made for the endogeneity of both domestic competition (number of firms) and the adoption of a competition law, however, we find that competition laws have an indirect effect on equilibrium markups by promoting a larger number of domestic firms.