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Institutions' Role in Promoting a Competitive Market

Lunds universitet/Nationalekonomiska institutionen
Publication Date
  • Economic Development
  • Competition
  • Institutions
  • Policies
  • Business And Economics
  • Economics
  • Political Science


This paper aims to examine whether competition law and policies have greater effect on competition when sound institutions are in place. Reports by major global actors as well as governmental reforming, show that there is unanimity on the notion that political reforming is essential in order to reach a more competitive market. Later economic research shows that institutions such as governance effectiveness and trust among people are important in order to sustain and increase economic growth. This paper assumes that this impact is partly due to the fact that institutions increase the incentives to invest and that the effect of institutions is especially clear among the smaller entrepreneurs since they are more sensitive to unsecure markets. With a cross-country regression comparing 30 OECD-countries, this paper finds that from a first look competition law and policies appear to have no effect on competition. However, when analysing the same relationship with the modification that institutions are added as an explaining variable, the results indicate that competition law and policies have a positive effect on competition for those few countries that have sound institutions in place.

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