Quantifying the Price Effect of Deregulation as a Pro-competition Policy

Abstract

This research constructs a data set regarding competition policy through a comprehensive review of previous studies, and performs a meta-analysis to quantitatively assess the price effects of deregulation. A structural econometric model is used to eliminate possible biases from heterogeneity of the studies,such as in publication types and measurement methods. Four types of regulations that deter competition are characterized and three groups of industries are made for drawing practical implications. We find that deregulation to promote competition reduces prices by 0.23% and that these estimated price effects are more stable when we control for the publication types and measurement ways. Easing regulations that restrict consumers’ choice is shown to be most efficient in promoting competition, lowering prices by 0.7%. This is followed by eliminating the limitation in the number of firms in the industry, with 0.2% price reduction. Overall, the network and service industries are shown to be more responsive to deregulation than the R&D industry. These results could shed light on policy implementation when a pro-competition policy is called for due to restrictive regulations in the corresponding industries.