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Trade costs and the timing of competition policy adoption

Rikard Forslid (), Jonas Häckner () and Astri Muren ()

Canadian Journal of Economics, 2011, vol. 44, issue 1, 171-200

Abstract: This paper first presents stylized evidence showing how the date of the adoption of competition policy is correlated with country size. Smaller countries tend to adopt competition policy later. We then present a theoretical model with countries of different size, trade costs, and firms competing à la Cournot. In the model we show that reduced trade costs following from increasing globalization affect countries differently depending on their size. This has implications for the incentives to introduce competition policy. The predictions of the model are consistent with the empirical regularity presented.

JEL-codes: F12 F15 F21 R12 (search for similar items in EconPapers)
Date: 2011
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