Reinforcing each other: how the combination of European and domestic reforms increased competition in liberalized industries

Crescioli, Tommaso ORCID: 0000-0002-4365-2522 (2024) Reinforcing each other: how the combination of European and domestic reforms increased competition in liberalized industries. European Journal of Political Economy, 83. ISSN 0176-2680

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Abstract

There is a consensus over Europe’s transformation into a highly competitive economy through a series of ambitious pro-competition reforms. However, both the European Commission and national actors have legislative authority over competition policies. Thus, who are the critical actors behind this legislative and economic transformation in this multi-level system? Focusing on the liberalization of state-owned industries and using a staggered difference-in-differences approach, the paper shows that the effectiveness of European directives in decreasing firm-level market power increased with the extent of preceding domestic pro-competition reforms. For every unit increase of the early domestic reform index, EU directives decrease market power in liberalized industries by an additional 7.8%. However, this effect is not significant in countries that did not reform their industries ex-ante. This finding contradicts the established view in the literature identifying the Commission as the dominant force driving this transformation, which implemented ambitious reforms by often overcoming the resistance of reluctant national governments. Instead, it is shown that the effectiveness of the Commission’s reforms depends on the support of domestic actors and compatible national institutions.

Item Type:	Article
Additional Information:	© 2024 The Author
Divisions:	Government Economics
Subjects:	J Political Science H Social Sciences > HB Economic Theory
JEL classification:	D - Microeconomics > D4 - Market Structure and Pricing > D41 - Perfect Competition D - Microeconomics > D4 - Market Structure and Pricing > D42 - Monopoly D - Microeconomics > D4 - Market Structure and Pricing > D43 - Oligopoly and Other Forms of Market Imperfection E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E60 - General L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General
Date Deposited:	23 May 2024 23:12
Last Modified:	17 Jul 2024 05:18
URI:	http://eprints.lse.ac.uk/id/eprint/123605

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