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Title:Deregulation as a means to increase competition and productivity: Some Finnish experiences PDF Logo
Authors:Valkonen, Laura
Issue Date:2006
Series/Report no.:ETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) 1014
Abstract:This study examines how deregulation affects product market competition and thereby productivity. Productivity grows when firms ameliorate their performance, which they will be unwilling to do in the absence of competition. It obliges firms to renounce high rents and cut costs, which increases static efficiency. However, static efficiency boosts productivity only temporarily. Long-term gains are derived from dynamic efficiency, which competition promotes in two ways. First, it increases incentives to innovate, and secondly, it accelerates creative destruction. Since regulations impede the free entry of rivals, they ensure firms a quiet life. Deregulation has therefore great potential to boost productivity growth. This study describes the process of regulatory reform in Finland. In addition to a country-level analysis, deregulation and its consequences are examined in service station and restaurant industries, which have experienced extensive reforms. The purpose was to see whether deregulation has induced external restructuring in these sectors. The results give some indication of external restructuring in both industries.
Subjects:deregulation, competition, productivity, entry
JEL:L51
D21
O30
K23
L80
Document Type:Working Paper
Appears in Collections:ETLA Discussion Papers, Research Institute of the Finnish Economy

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