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Measuring competition in services markets with pass-through and speed of adjustment

Frédéric Gonzales, Hildegunn Nordås and Michel Lioussis

No 258, OECD Trade Policy Papers from OECD Publishing

Abstract: Making trade work for all and harnessing popular support for openness to trade depends on consumers benefitting from lower prices and broader product variety. The present study reveals that those benefits depend on competition in services markets, in particular in telecommunication. These findings result from employing an industrial organisation framework to estimate the transmission of prices from the world market to consumers of certain services in local markets (distribution, transport, and financial services). The OECD Services Trade Restrictiveness Index (OECD STRI) is used to explore the relationship between the pass-through rate of input prices to consumer prices and policy measures that capture the openness and strength of competition in services markets. The OECD STRI in telecommunications is found to be associated with a more complete and faster pass-through of prices in all markets studied. The results also illustrate the crucial role played by the internet in allowing for price comparisons that generate competitive pressure on distributors.

Keywords: Cointegration; Pass-through rates; Price signals; Services trade restrictions (search for similar items in EconPapers)
JEL-codes: C1 D23 D41 L11 (search for similar items in EconPapers)
Date: 2021-12-01
New Economics Papers: this item is included in nep-com, nep-int and nep-reg
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