Does Antitrust Policy Promote Market Innovation and Competitiveness?

Abstract

Over the past three decades, antitrust laws have proliferated across the globe. International institutions and governments have promoted antitrust policy as an important regulatory tool to enhance economic performance. At the same time, we have scant empirical evidence on whether these policies actually work. Do they foster market competition, with the ensuing benefits of greater efficiency, economic prosperity and innovation? In other words, is the adoption of these antitrust laws good public policy and an efficient use of scarce public resources? Our research seeks to provide a theoretical and empirical foundation to these questions. We develop a novel dataset on antitrust laws and enforcement across time and jurisdictions that accounts for political and institutional nuances, and link these variables to patent data. This enables us to construct robust measures quantifying antitrust regimes and, for the first time, systematically test alternative hypotheses on the impact of antitrust policy on innovation. While our research focuses on antitrust policy, this project provides an analytical foundation for thinking about the determinants of regulatory policies and their relative ability to contribute to more innovative and competitive markets and, ultimately, to greater social welfare.

Keywords: regulation, antitrust, competition law and policy, economic institutions and performance

JEL Classification: H11, K21, L40, L51