Competition Politics

Abstract

This article examines the political origins of antitrust enforcement in the developing countries. I consider how the organization and political influence of business affects governments’ commitments to competition policy institutions. The analysis predicts cross-class coalitions with contending regulatory preferences. An alliance of incumbent producers and affiliated labor groups (“insiders”) opposes competition policies that threaten its existing rents. A procompetition coalition of consumers, unorganized workers, and small businesses (“outsiders”) favors the price and employment effects of effective antitrust enforcement. I argue that governments’ commitments to competition policy reflect the congruence of interests among economic insiders and the strength of democratic institutions. I examine the argument using a new dataset measuring the timing of competition policy reforms, as well as governments’ commitments to the effectiveness of the competition policy authority. The empirical analysis indicates that democracies are more likely to pursue competition policy reforms. I also find that organized insiders are associated with a slower reform process and with less effective competition agencies.