Measuring the benefits

John Davies, Head, Competition DivisionNovember 2014

Quantifying the benefits can help sell competition reforms

1. Short-term consumer benefit (prices, quality, choice)

2. Economic growth

3. Employment, equality and other socioeconomic benefits (or at least demonstrations of ‘no harm’)

But the evidence base for developing countries is often

weak!

Short term consumer benefits

Issue Annual Benefit Number of

provisions affected

Value, €m

“Fresh” milk €33m (consumer benefit/year) 2 33

Levy on flour €8m-11m (value of levy/year) 1 8

Sunday trading€2.5bn (annual expenditure), plus 30,000 new jobs 3 2 500

Sales and discounts €740m (annual turnover) 9 740Over the Counter pharmaceuticals €102m (consumer benefit/year) 23 102

Marinas €2.3m (annual turnover) 10 2

Cruise business €65m (annual turnover) 4 65

Advertising €1.8b (consumer benefit/year) 14 1 800

Everything else ??? 263 ???

Source: http://www.oecd.org/greece/greececompetitionassessment.htm

Forthcoming Toolkit Vol 3: Literature summary for impact of deregulation

Mean price change

Price effectNumber of

studiesCategory and sub-category of

regulatory restriction

Source: OECD Competition Assessment Toolkit Volume 3 (OECD – forthcoming 2015)

Forthcoming Toolkit Vol 3: Literature summary for impact of deregulation

All fully referenced in OECD Competition Assessment Toolkit Volume 3 (OECD – forthcoming 2015)

We welcome suggestions for additional case

studies!

Competition and growth

“Factsheet on the links between competition, productivity and growth”, OECD 2014

Competition and growth

Source: OECD. *Three-year moving average

-4

-2

0

2

4

6

8

Australia

OECD - Total

"Hilmer reforms": competition assessment of all new and existing laws

and regulations

Smoothed* GDP growth: Australia and OECD average

Competition and growth

Product Market Regulation and average total factor productivity

Source: OECD, using Indian National Accounts statistics

Competition and growth

Source: Hsieh and Klenow (2009) © Published with the permission of Oxford University Press

Source: Hsieh and Klenow (2009), referenced fully in “Factsheet on the links between competition, productivity and growth”, OECD 2014

Distribution of Total Factor Productivity between manufacturing plant

But growth is not everything…

Inequality

Welfare loss from monopolised products 1.5x higher in poorest, rural decile, than richest urban decile, in Mexico

Urzua (2009)

 

Perhaps half of the wealth of the richest households in the USA in the 1970s was derived from monopoly profits.

Connor and Smiley (1975)

Obviously, a very broad-brush conclusion, but of interest especially in the light of renewed interest in inequalities derived from inherited wealth, following Picketty.

Employment

A one standard-deviation decrease in product market regulation would generate a long run gain of 1.1% in the employment rate in France

Fiore et al (2012)

Based on the OECD Product Market Regulation indicators. Effect arises through labour market efficiency.

Zoning regulations in France in the 1970s reduced long-run retail employment by 10%.

Bertrand and Krammarz (2001)

Based on comparative analysis of development of retail sector employment in France and USA.

All referenced fully in “Factsheet on the links between competition, productivity and growth”, OECD 2014

Thank you for your attention

www.oecd.org/competition

MANUAL

Competition Assessment Toolkit Vol 3: ManualDetailed database of

literature on liberalisation effects

Forthcoming 2015

Factsheet on the links between competition,

productivity and growth 2014