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on Industrial Competition |
| By: | Michiel van Leuvensteijn (CPB Netherlands Bureau for Economic Policy Analysis, P.O. Box 80510, 2508 GM The Hague, The Netherlands.); Christoffer Kok Sørensen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jacob A. Bikker (De Nederlandsche Bank (DNB), Supervisory Policy Division, Strategy Department, P.O. Box 98, 1000 AB Amsterdam, The Netherlands.); Adrian A.R.J.M. van Rixtel (Banco de España, International Economics and International Relations Department, Alcalá 48, 28014 Madrid, Spain.) |
| Abstract: | This paper analyses the impact of loan market competition on the interest rates applied by euro area banks to loans and deposits during the 1994-2004 period, using a novel measure of competition called the Boone indicator. We find evidence that stronger competition implies significantly lower spreads between bank and market interest rates for most loan market products. Using an error correction model(ECM) approach to measure the effect of competition on the pass-through of market rates to bank interest rates, we likewise find that banks tend to price their loans more in accordance with the market in countries where competitive pressures are stronger. Further, where loan market competition is stronger, we observe larger bank spreads (implying lower bank interest rates) on current account and time deposits. This would suggest that the competitive pressure is heavier in the loan market than in the deposit markets, so that banks compensate for their reduction in loan market income by lowering their deposit rates. We observe also that bank interest rates in more competitive markets respond more strongly to changes in market interest rates. These findings have important monetary policy implications, as they suggest that measures to enhance competition in the European banking sector will tend to render the monetary policy transmission mechanism more effective. JEL Classification: D4, E50, G21, L10. |
| Keywords: | Monetary transmission, banks, retail rates, competition, panel data. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080885&r=com |
| By: | Rueda Maurer, Maria Clara (Swiss National Bank) |
| Abstract: | In this paper I examine how the protection of creditors' rights influence the way in which foreign bank entry affects the access to credit of firms. Using a sample of more than 6000 firms in 22 transition countries I find that as bankruptcy proceedings become more inefficient foreign bank entry is more likely to crowd-out small and opaque firms. Conversely, as the protection of creditors' rights improve, the positive association between foreign banks and firms' credit constraints diminishes. These results are robust to controls for endogeneity of foreign banks. The interaction of foreign banks and the protection of creditors rights would explain the disparity of results obtained by previous studies: In countries with an adequate protection of creditor rights foreign bank entry may benefit all firms; By contrast, in countries with weak protection of creditor rights foreign bank entry is likely to result in a credit crunch. |
| Keywords: | Institutional development; Transition; Foreign Bank Entry; Information asymmetries; Small Business Lending. |
| JEL: | D82 G10 G21 G31 |
| Date: | 2008–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:ris:snbwpa:2008_004&r=com |
| By: | Czarnitzki, Dirk; Toole, Andrew A. |
| Abstract: | This paper investigates how competition and firm size affect the relationship between market uncertainty and R&D investment. We use an intuitively appealing measure of firm-specific uncertainty along with panel data to show that firms invest less in current R&D as uncertainty about market returns increases. The effect of firm-specific uncertainty on R&D investment is smaller in concentrated markets – those where market power is higher and strategic rivalry is more intense. Further, the effect of uncertainty on R&D investment is attenuated for large firms which may be the result greater economies of scope. Unsicherheit ist ein immanenter Faktor von Forschungs- und Entwicklung (FuE) und hat einen grundlegenden Einfluss auf Investitionsentscheidungen. Die Literatur zu „Real Options“ Modellen bildet eine Basis für empirische Analysen von Investitionsentscheidungen, insbesondere wenn es sich um größtenteils irreversible Ausgaben wie FuE-Aktivitäten handelt. Wenn Profite solcher Investitionsprojekte ungewiss sind und Unternehmen diese Investition verzögern können, zeigen ökonomische Theorien, dass bei höherer Unsicherheit weniger investiert wird. Jedoch gibt es auch Modelle, die beschreiben, dass die Option die Investition zu verzögern, nicht profitabel sein muss, wenn Unternehmen einem hohen Konkurrenzdruck ausgesetzt sind, oder wenn diese FuE-Aktivitäten hinreichende Wachstumsmöglichkeiten versprechen. Durch solche gegensätzlichen Anreize ist der Effekt von Unsicherheit auf das Investitionsverhalten nicht eindeutig. In dieser Studie analysieren wir empirisch, wie Wettbewerb und Unternehmensgröße einen möglichen negativen Zusammenhang zwischen Investitionen und Unsicherheit beeinflussen. Mit Hilfe von Paneldaten können wir zeigen, dass Unternehmen bei höherer Unsicherheit über die erwarteten Profite tatsächlich weniger investieren. Jedoch ist der Effekt der firmenspezifischen Unsicherheit kleiner in konzentrierten Märkten sowie in Großunternehmen. Wir führen dies auf zwei Gründe zurück. In konzentrierten Märkten kann die strategische Interaktion zwischen Unternehmen intensiver sein als in anderen Märkten. Durch Innovationsaktivitäten kann ein Konkurrenzkampf in Produktmärkten vorweggenommen werden, sodass der negative Effekt von Unsicherheit reduziert wird. Ferner können Großunternehmen Erkenntnisse aus FuE-Aktivitäten besser in alternative Verwendungen transferieren als kleine Unternehmen („economies of scope“), was auch zur Reduktion der negativen Investitionsanreize unter Unsicherheit führt. |
| Keywords: | Real Options Theory, Uncertainty, R&D, Competition, Firm Size |
| JEL: | G31 L11 O31 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7122&r=com |
| By: | Kurt Niquidet; Glen O'Kelly |
| Abstract: | In Canada, where public ownership of forestland is prevalent, a central decision facing policy makers is how to allocate timber resources to private forest companies. Debates tend to focus around what proportion of the annual harvest should be devoted to markets opposed to long-term contracts. To give a guide to policy makers, we surveyed forest firms from New Zealand and Sweden where this decision is based purely on a commercial basis. On average, mills source fifty percent of their fibre from the market. However, using a fractional logit model, we test whether theories from transaction cost economics influence this decision. Results are consistent with transaction cost economics; firms decrease the proportion of fibre sourced from a market with increasing fibre specificity, capital intensity, and uncertainty. |
| Keywords: | transaction costs, forest tenure, vertical integration |
| JEL: | D23 K23 L22 L73 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:rep:wpaper:2008-07&r=com |
| By: | Azomahou, Théophile (UNU-MERIT); Boucekkine, Raouf (CORE, Universite Catholique de Louvain); Nguyen-Van, Phu (CNRS, Université de Cergy-Pontoise,) |
| Abstract: | We develop a general equilibrium vintage capital model with embodied energy-saving technological progress and an explicit energy market to study the impact of investment subsidies on investment and output. Energy and capital are assumed to be complementary in the production process. New machines are less energy consuming and scrapping is endogenous. It is shown that the impact of investment subsidies heavily depends on the structure of the energy market, the mechanism explaining this outcome relying on the tight relationship between the lifetime of capital goods and energy prices via the scrapping conditions inherent to vintage models. In particular, under a free entry structure for the energy sector, investment subsidies boost investment, while the opposite result emerges under natural monopoly if increasing returns in the energy sector are not strong enough. |
| Keywords: | Energy-saving, Technological change, Vintage capital, Energy market, Natural monopoly, Investment subsidies |
| JEL: | E22 O40 Q40 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2008032&r=com |
| By: | Vijaya Ramachandran; Manju Kedia Shah; Gaiv Tata |
| Abstract: | Prior research has emphasized that the high costs and risks arising from a poor investment climate—lack of clear property rights, macro-instability, the burden of regulation and taxation, poor infrastructure, lack of finance, and lack of human capital—have impeded the development of the private sector in sub-Saharan Africa, despite adoption of structural adjustment and liberalization policies. Given the resulting wide differentials in productivity, it is not surprising that most of the African manufacturing sector has not been competitive in exports. However, trade liberalization should have had greater impact on domestic markets for manufactured goods in Africa, leading to either a rapid decline in the size of the manufacturing sector due to import competition, or to a rapid increase in productivity of surviving enterprises. In fact, neither has happened to any significant degree over the last 20 years. Based on data from enterprise surveys conducted by the Regional Program for Enterprise Development at the World Bank, this paper argues that some African manufacturing enterprises have continued to retain their market leadership in domestic markets by investing in relationships with governments, thereby maintaining high barriers to entry and a reduced degree of competition. This influence is particularly severe in some countries in Africa and is often driven by relatively few enterprises. In particular, Zambia and Kenya seem to suffer a high degree of influence-peddling, while Mali and Senegal are at the low end of the scale. Comparisons with selected countries in Asia show that lobbying in East Africa is different than in Asia—larger enterprises, and enterprises with higher market share lobby in Africa, as compared to Asia where market share is not a significant determinant of lobbying activity. The results imply that attempts to improve the productivity of the African private sector through focusing only on the removal of trade barriers, improvements in the investment climate, and private sector capacity building will at most be partially successful. In order to escape from the current low-level equilibrium trap, future reforms will need to explicitly consider political economy issues. From this perspective, the role of regional integration as a tool of competition policy will need to be given greater consideration. |
| Keywords: | Africa, economic reform, influence-peddling |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:127&r=com |
| By: | Mehmet Karaçuka (Department of Economics, Ege University); Recep Kök (Department of Economics, Dokuz Eylul University) |
| Abstract: | (This Paper is in Turkish) Services that are based on telecommunication networks, which are crucial infrastructural elements of the information societies, have been gaining increasing attention as composing higher shares within the economies. However, economies of scale in the supply side and network effects in the demand side prevent these markets to be perfectly competitive, and to reach social welfare maximizing equilibria; therefore making regulation a crucial instrument. Turkish mobile telecommunication services form the most competitive segment of overall telecommunication services in Turkey, where the competition process is dysfunctional in the fixed line services. Literature on network industries points out that incumbent firms may prevent new entrants’ competition via network effects and access/ interconnection charges. Our study emphasizes the importance of ex-ante regulation by analysing the strategic interaction among the entrant and incumbent firms in Turkish mobile telecommunications, as well as regulation problems. |
| Keywords: | Network effects, Competition in telecommunication markets, Regulation, Turkish mobile telecommunication markets, Sebeke etkileri, Telekomünikasyon piyasalarinda rekabet, Regülasyon, Türk mobil telekomünikasyon piyasalari |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:ege:wpaper:0803&r=com |