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Competition Politics: Interest Groups, Democracy, and Antitrust Reform in Developing Countries

39 Pages Posted: 17 Jul 2009 Last revised: 7 Jan 2013

Stephen J. Weymouth

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy

Date Written: May 8, 2009

Abstract

This paper examines the political origins of business regulation. Specifically, I study the influence of interest groups on regulatory reform using a new dataset of competition (or antitrust) enforcement agencies in 155 developing countries. I extend existing research highlighting the effects of competition on prices in product markets by considering the labor market implications of antitrust. The analysis predicts cross-class coalitions with contending regulatory preferences. An alliance of incumbent producers and affiliated labor (“insiders”) opposes competition policies that threaten its existing rents. A pro-competition coalition of consumers, unorganized workers, and entrepreneurs (“outsiders”) favors the price and employment effects of antitrust enforcement. I argue that governments’ commitments to competition policy reflect the congruence of interests among economic insiders and the electoral incentives present in democracies. Consistent with the argument, I find that organized insiders slow the reform process and significantly weaken governments’ commitments to regulatory effectiveness. Democracy exudes offsetting effects: while it favors outsiders on average, it also appears to facilitate the capture of regulatory institutions by powerful interest groups.

Keywords: Competition Policy, International Political Economy, Political Institutions, International Business, Rent-Seeking, Antitrust

Suggested Citation

Weymouth, Stephen J., Competition Politics: Interest Groups, Democracy, and Antitrust Reform in Developing Countries (May 8, 2009). CELS 2009 4th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: https://ssrn.com/abstract=1434226 or http://dx.doi.org/10.2139/ssrn.1434226

Stephen J. Weymouth (Contact Author)

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy ( email )

Washington, DC 20057
United States

HOME PAGE: http://faculty.msb.edu/sw439/

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