A Quantitative Evaluation of Effectiveness and Efficacy of Competition Policies Across Countries

Abstract

This paper proposes a quantitative, cross-sectional framework for ex-post evaluation of competition policies from relevance, effectiveness and efficacy perspectives. The paper evaluates competition policy output effectiveness and outcome efficacy in the sample countries. The evaluation has two levels that focus on an intermediate output and a final outcome, respectively. The intermediate output is defined as “competition policy implementation, advocacy and enforcement effectiveness.” A positive link from the legal framework and resource use to competition policy implementation, advocacy and enforcement indicates an effective intermediate output. The final outcome is defined as “national competitiveness to attract foreign direct investment (FDI).” A positive link from a country’s intermediate output effectiveness to the country’s competitiveness to attract FDI is interpreted as an efficacious final outcome. These two links are quantitatively estimated through numerical indicators. Statistical results obtained are consistent with the existence of measurable implementation gaps (1) between the developing and the developed countries, and (2) between the recent European Union members or candidate(s) and the more senior E.U. members, controlling for the level of resources used in competition implementation, advocacy and enforcement. These gaps cannot be bridged merely by increasing the size of the competition agencies’ budgets. Reorganizing agencies’ spending priorities as well as developing extra-agency initiatives can be complementary means to bridge these gaps. Statistical evidence is also consistent with a positive association between competition effectiveness and policy efficacy. Efficacy may also be a function of binary variables (for example, E.U. membership); if so, efficacy can partially be increased through a binary transformation in a country’s status. Conversely, an efficacy gap may persist as long as economic and other types of conditions preclude a binary transformation.