Does more intense competition lead to higher growth?

The relationship between the intensity of competition in an economy and its long-run growth is an open question in economics. Theoretically, there is no clear-cut answer. Empirical evidence exists, however, that in some sectors more competition leads to more innovation, and accelerates productivity growth. To complement those findings, and capture economy-wide effects, the authors conduct a cross-country study. They examine the impact on growth of various measures having to do with intensity of domestic competition - beyond the effects of trade liberalization. Their results indicate a strong correlation between long-run growth, and effective enforcement of antitrust, and competition policy.Environmental Economics&Policies,Economic Theory&Research,ICT Policy and Strategies,Labor Policies,Decentralization,Economic Theory&Research,Environmental Economics&Policies,ICT Policy and Strategies,Achieving Shared Growth,Governance Indicators

Green growth, technology and innovation

The paper explores existing patterns of green innovation and presents an overview of green innovation policies for developing countries. The key findings from the empirical analysis are: (1) frontier green innovations are concentrated in high-income countries, few in developing countries but growing; (2) the most technologically-sophisticated developing countries are emerging as significant innovators but limited to a few technology fields; (3) there is very little South-South collaboration; (4) there is potential for expanding green production and trade; and (5) there has been little base-of-pyramid green innovation to meet the needs of poor consumers, and it is too early to draw conclusions about its scalability. To promote green innovation, technology and environmental policies work best in tandem, focusing on three complementary areas: (1) to promote frontier innovation, it is advisable to limit local technology-push support to countries with sufficient technological capabilities -- but there is also a need to provide global technology-push support for base-of-pyramid and neglected technologies including through a pool of long-term, stable funds supported by demand-pull mechanisms such as prizes; (2) to promote catch-up innovation, it is essential both to facilitate technology access and to stimulate technology absorption by firms -- with critical roles played by international trade and foreign direct investment, with firm demand spurred by public procurement, regulations and standards; and (3) to develop absorptive capacity, there is a need to strengthen skills and to improve the prevailing business environment for innovation -- to foster increased experimentation, global learning, and talent attraction and retention. There is still considerable progress to be made in ranking green innovation policies as most appropriate for different developing country contexts -- based on more impact evaluation studies of innovation policies targeted at green technologies.Environmental Economics&Policies,E-Business,ICT Policy and Strategies,Technology Industry,Climate Change Mitigation and Green House Gases

Regulatory reform, competition, and innovation - a case study of the Mexican road freight industry

Discussions of competition and regulatory reform typically focus on price and quantity effects. But improving certain infrastructure services can also stimulate entry, and competition in user industries downstream, allowing new firms to enter, incumbent users to offer new products, and rivalry to intensify. The authors present a case study of how innovations in road freight services affect selected downstream users of those services after regulatory reform. After a period of rigid regulation, and heavy government interference, Mexico in 1989 developed a new policy framework for road transport, with free entry, and market-based price setting. The result: faster, more reliable trucking has allowed user companies to offer new, previously unavailable products, and to reach new areas with existing products. Cheaper, more customer-responsive trucking services have allowed logistical innovations in user firms, and some user firms have decided not to keep their own fleets of trucks, but to outsource trucking services on the open market, thereby converting fixed costs to variable costs. For one fertilizer company, the benefits of reform included a ten percent improvement in operating margin. Successful reform requires careful planning and execution, and political support at high levels. Regulatory reform also profoundly changes the sectoral institution formerly responsible for the regulation. Enough resources should be provided to help organizations in the reformed industry make the transition to the post-reform environment - helping with such tasks as defining the organization's new role, and facilitating the redeployment of staff. The national competition agency can help greatly in laying the groundwork for reform by making a compelling case for the reform's expected benefits. After reform, the competition agency should also help with enforcement, to ensure that the cozy, cartel-like behavior stimulated by tight entry restrictions does not persist. In Mexico, three strong interventions were required to discipline attempted anti-competitive practices in the trucking industry in the years following reform.Common Carriers Industry,Environmental Economics&Policies,Roads&Highways,Transport and Trade Logistics,Banks&Banking Reform,Roads&Highways,Transport and Trade Logistics,Common Carriers Industry,ICT Policy and Strategies,Environmental Economics&Policies

Enforcement of Canadian"unfair"trade laws : the case for competition policies as an antidote for protection

Canada was the first country to enact comprehensive antitrust legislation (in 1889) and to institute an antidumping system (in 1904). Canada's original"unfair"trade legislation reflected a desire to prohibit predatory dumping. But the result of Canada's recent enforcement of unfair trade laws has been high levels of protection for a few well-organized firms. Canada's recent overhaul of its unfair trade legislation was not followed by any dramatic change in enforcement practice. If anything, the protection bias of Canadian enforcement has increased. The bias against exports from developing countries has also increased significantly in the years following implementation of the revised antidumping and countervailing duty legislation (SIMA). Comparing cases involving developed and developing countries suggests a protectionist bias against the developing country bloc. Thisbias increased in the years following the implementation of SIMA. The author argues that an approach based on competition policy principles or on an economywide perspective, by focusing on the broader impact of policies, offers an economically more rational way to deal with issues currently addressed by unfair trade remedies. While unfair trade laws aim to protect domestic competitors, competition laws strive to protect the competitive process. Unfortunately, international standards weigh against Canada modifying its current standard.Markets and Market Access,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,Access to Markets

Firm output adjustment to trade liberalization : theory with application to the Moroccan experience

Over the period 1984 to 1987, a major liberalization of restrictive trade policies was implemented in the Moroccan manufacturing sector. The level of imports changed across different industries according to each industry's degree of liberalization. The paper focuses on exploring the distribution of output adjustment among incumbent firms to the changes in imports following a particular trade liberalization episode. A domestic oligopoly model where competing firms are not equally efficient, with perfectly substitutable imports fixed at some exogenous pre-reform level, provides the theoretical framework for the study. Such a model predicts that firm output contraction will be larger the greater the increase in imports. The results represent a first step in the analysis of firm adjustment to trade liberalization. While the paper shows that output in small firms contracts more than output in large firms, it presents no evidence of a shift of production from small to large firms.Environmental Economics&Policies,Economic Theory&Research,Water and Industry,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Small Scale Enterprise

Competition and innovation-driven inclusive growth

The paper investigates the strength of innovation-driven employment growth, the role of competition in stimulating and facilitating it, and whether it is inclusive. In a sample of more than 26,000 manufacturing establishments across 71 countries (both OECD and developing), the authors find that firms that innovate in products or processes, or that have attained higher total factor productivity, exhibit higher employment growth than non-innovative firms. The strength of firms'innovation-driven employment growth is significantly positively associated with the share of the firms'workforce that is unskilled, debunking the conventional wisdom that innovation-driven growth is not inclusive in that it is focused on jobs characterized by higher levels of qualification. They also find that young firms have higher propensities for product or process innovation in countries with better Doing Business ranks (both overall and ranks for constituent components focused on credit availability and property registration). Firms generally innovate more and show greater employment growth if they are exposed to more information (through internet use and membership in business organizations) and are exporters. The empirical results support the policy propositions that innovation is a powerful driver of employment growth, that innovation-driven growth is inclusive in its creation of unskilled jobs, and that the underlying innovations are fostered by a pro-competitive business environment providing ready access to information, financing, export opportunities, and other essential business services that facilitate the entry and expansion of young firms.Environmental Economics&Policies,Labor Policies,Labor Markets,E-Business,Microfinance

C-peptide and metabolic outcomes in trials of disease modifying therapy in new-onset type 1 diabetes: an individual participant meta-analysis

Background Metabolic outcomes in type 1 diabetes remain suboptimal. Disease modifying therapy to prevent β-cell loss presents an alternative treatment framework but the effect on metabolic outcomes is unclear. We, therefore, aimed to define the relationship between insulin C-peptide as a marker of β-cell function and metabolic outcomes in new-onset type 1 diabetes. Methods 21 trials of disease-modifying interventions within 100 days of type 1 diabetes diagnosis comprising 1315 adults (ie, those 18 years and older) and 1396 children (ie, those younger than 18 years) were combined. Endpoints assessed were stimulated area under the curve C-peptide, HbA1c, insulin use, hypoglycaemic events, and composite scores (such as insulin dose adjusted A1c, total daily insulin, U/kg per day, and BETA-2 score). Positive studies were defined as those meeting their primary endpoint. Differences in outcomes between active and control groups were assessed using the Wilcoxon rank test. Findings 6 months after treatment, a 24·8% greater C-peptide preservation in positive studies was associated with a 0·55% lower HbA1c (p<0·0001), with differences being detectable as early as 3 months. Cross-sectional analysis, combining positive and negative studies, was consistent with this proportionality: a 55% improvement in C-peptide preservation was associated with 0·64% lower HbA1c (p<0·0001). Higher initial C-peptide levels and greater preservation were associated with greater improvement in HbA1c. For HbA1c, IDAAC, and BETA-2 score, sample size predictions indicated that 2–3 times as many participants per group would be required to show a difference at 6 months as compared with C-peptide. Detecting a reduction in hypoglycaemia was affected by reporting methods. Interpretation Interventions that preserve β-cell function are effective at improving metabolic outcomes in new-onset type 1 diabetes, confirming their potential as adjuncts to insulin. We have shown that improvements in HbA1c are directly proportional to the degree of C-peptide preservation, quantifying this relationship, and supporting the use of C-peptides as a surrogate endpoint in clinical trials

Productivity, Innovation and Growth in Sri Lanka: An Empirical Investigation

This study investigates the impact of key business environment indicators on productivity, innovation, and growth in Sri Lanka through a cluster-level productivity analysis, a firm-level total factor productivity analysis, and a firm-level innovation analysis. For the cluster-level productivity analysis (as measured by output and value added per worker), it combines two established data sources in a novel way by importing average 'industry-size-location' cluster-level business environment variables from the World Bank Enterprise Survey to the comprehensive Sri Lanka Census of Industry productivity data available for similar clusters of enterprises. For the firm-level total factor productivity analysis, it compares data from the 2011 World Bank Enterprise Survey with those from 2004. For the firm-level innovation analysis, it compares findings from the 2011 World Bank Enterprise Survey with a representative sample of enterprises collected as part of the Sri Lanka Longitudinal Survey of Enterprises. The empirical findings highlight the importance -- for cluster-level productivity, firm-level total factor productivity, and innovation -- of connectivity to global knowledge (reflected by one or more of export participation, directly imported inputs, foreign ownership, and use of the internet), availability of skills, access to finance, and competition. The paper also presents evidence, under the assumption that the samples are statistically representative, that both allocative and average technical efficiency have improved, with allocative efficiency increasing roughly four-fold between 2003 and 2010, and accounting for the overwhelming share of the aggregate increase in total factor productivity over this time period. Most of the improvement in allocative efficiency has occurred among larger firms, and in large rather than small cities

Firm output adjustment to trade liberalization : theory with application to the Moroccan experience

Mark A. Dut