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A Step Ahead: Competition Policy for Shared Prosperity and Inclusive Growth

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A Step Ahead: Competition Policy for Shared Prosperity and Inclusive Growth A Step Ahead A Step Ahead Competition Policy for Shared Prosperity and Inclusive Growth © 2017 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 20 19 18 17 This work is a product of the staff of The World Bank and the Organisation for Economic Co-operation and Development (OECD) with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent or those of the OECD or its member countries. The World Bank and the OECD do not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank or the OECD concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank or the OECD, all of which are specifically reserved. Rights and Permissions Other than chapter 5, which is © OECD and available under the Creative Commons Attribution Non-Commercial No Derivatives 3.0 IGO (CC BY-NC-ND 3.0 IGO) public license, this work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creativecommons.org/licenses /by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank. 2017. A Step Ahead: Competition Policy for Shared Prosperity and Inclusive Growth. Washington, DC: World Bank. doi:10.1596/978-1-4648-0945-3. License: Creative Commons Attribution CC BY 3.0 IGO Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank or the OECD and should not be considered an official World Bank or OECD translation. The World Bank or the OECD shall not be liable for any content or error in this translation. Adaptations—If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank and the OECD. Views and opin- ions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank or the OECD. Third-party content—The World Bank and the OECD do not necessarily own each component of the content contained within the work. The World Bank and the OECD therefore do not warrant that the use of any third- party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: [email protected]. ISBN (paper): 978-1-4648-0945-3 ISBN (electronic): 978-1-4648-0946-0 DOI: 10.1596/978-1-4648-0945-3 Cover photo: © iStock/martinhosmart. Used with the permission of iStock/martinhosmart. Further permission required for reuse. Cover design: Bill Pragluski, Critical Stages. Library of Congress Cataloging-in-Publication Data has been requested. Contents Foreword ........................................................................................................................................... xi Acknowledgments .........................................................................................................................xiii Abbreviations ................................................................................................................................... xv Part I Competition Policy, Shared Prosperity, Poverty Alleviation, and Inclusive Growth: Empirical Evidence to Support Policy Action ............1 1. Introduction .............................................................................................................3 1.1 What Is Competition Policy? ..................................................................5 1.2 How Does the Degree of Competition Affect Poverty, Shared Prosperity, and Inclusive Growth? .............................................7 1.3 In Which Sectors Can Safeguarding Competition Maximize Benefits for the Poor? ............................................................................11 Notes ..............................................................................................................17 Bibliography ..................................................................................................18 2. Effects of Market Competition and Competition Policies ............................21 2.1 Direct Welfare Effects on the Level and Distribution of Household Welfare ................................................................................21 2.2 Dynamic Effects: Competition as a Driver of Productivity, Innovation, and Economic Growth .....................................................46 2.3 Further Research for a Policy Agenda ..................................................56 Notes ..............................................................................................................59 Bibliography ..................................................................................................62 Part II New Research on Competition Policies and Their Welfare-Enhancing Effects ...........................................................................75 3. Cartel Damages to the Economy: An Assessment for Developing Countries ................................................................................................................77 Marc Ivaldi, Frédéric Jenny, and Aleksandra Khimich 3.1 Introduction ..........................................................................................77 3.2 Collected Data: Cartels’ Profiles in Developing Countries .................79 v 3.3 Estimation of Price Overcharges ..........................................................84 3.4 Aggregated Cartels’ Effects ....................................................................89 3.5 Estimation of the Deterrence Rate .......................................................93 3.6 Conclusions and Policy Implications ...................................................94 Annex 3A: Major “Hard-Core” Cartels Prosecuted in Selected Developing Countries, 1995–2013 .......................................................96 Annex 3B: Questionnaire Submitted to Local Competition Authorities ....104 Annex 3C: Example of the Calibration and Estimation Procedure: Civil Airlines in Brazil ...............................................................................104 Notes ............................................................................................................107 Bibliography ................................................................................................109 4. Undermining Inclusive Growth? Effects of Coordination on Fertilizer Prices in Malawi, Tanzania, and Zambia .....................................111 Thando Vilakazi 4.1 Introduction ........................................................................................112 4.2 Inclusion, Cartels, and Recent Experiences in Fertilizer Markets in the Region .........................................................................114 4.3 Fertilizer Pricing in Malawi, Tanzania, and Zambia ..........................119 4.4 Changing Dynamics in Fertilizer Markets in Tanzania and Zambia .......................................................................122 4.5 Conclusions and Policy Implications .................................................127 Notes ............................................................................................................129 Bibliography ................................................................................................130 5. Market Power and Wealth Distribution ........................................................133 Sean F. Ennis and Yunhee Kim 5.1 Introduction ........................................................................................133 5.2 Model ...................................................................................................135 5.3 Data ......................................................................................................137 5.4 Calibration of Impacts ........................................................................138 5.5 Conclusions and Policy Implications .................................................151 Notes ............................................................................................................152 Bibliography ................................................................................................153 6. Distributional Macroeconomic Effects of the European Union Competition Policy: A General Equilibrium Analysis ..................................155
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