Enforcing Competition and Firm Productivity : Evidence from 1,800 Peruvian Municipalities
This paper uses a unique data set that captures the elimination of subnational regulatory barriers to firm entry and competition across 1,800 municipalities and matches it with establishment census panel data to estimate the impact on establishment...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/959721548166483225/Enforcing-Competition-and-Firm-Productivity-Evidence-from-1-800-Peruvian-Municipalities http://hdl.handle.net/10986/31182 |
| Summary: | This paper uses a unique data set that
captures the elimination of subnational regulatory barriers
to firm entry and competition across 1,800 municipalities
and matches it with establishment census panel data to
estimate the impact on establishment productivity and
markups. The elimination of local barriers that were
inconsistent with national legislation was the result of
legal reforms that strengthened the mandate of Peru's
competition authority. Legislative changes in 2013/14
empowered the competition authority to enforce the
elimination of illegal, sector-specific subnational
regulatory barriers to firm entry and competition,
conditional on the existence of a precedence. The changes
provide a unique quasi-experimental setting to identify the
impact of enforcing competition within the controlled
institutional environment of a single country. The paper
finds that the elimination of subnational barriers to entry
boosted the (revenue) productivity of establishments
operating in reform municipalities and sectors relative to
establishments in nonreform municipalities/sectors. But it
did not raise the establishments' markups, which, if
anything, declined, suggesting that physical productivity
improved. The paper provides a wide range of evidence
supporting a causal interpretation of this finding. The
results suggest that strengthening the mandate of
institutions enforcing competition is critical to raise productivity. |
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