Working Paper: NBER ID: w24700
Authors: Germn Gutierrez; Thomas Philippon
Abstract: Over the past twenty years, Europe has deregulated many industries, protected consumer welfare, and created strongly independent regulators. These policies represent a stark departure from historical traditions in continental Europe. How and why did this turnaround happen? We build a political economy model of market regulation and we compare the design of national and supra-national regulators. We show that countries in a single market willingly promote a supranational regulator that enforces free markets beyond the preferences of any individual country. We test and confirm the predictions of the model. European institutions are indeed more independent and enforce competition more strongly than any individual country ever did. Countries with ex-ante weaker institutions benefit more from the delegation of competition policy to the EU level.
Keywords: European markets; regulation; competition; supranational regulator; deregulation
JEL Codes: D02; D41; D42; D43; D72; E25; K21; L00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Establishment of a supranational competition regulator (L40) | Stronger enforcement of competition policies (L49) |
| Deregulation of European markets (L51) | Increased competition (L13) |
| Independent EU competition authority (L40) | More effective than national regulators (G18) |
| Shift towards a more competitive environment in Europe (O52) | Real effects on market dynamics (D49) |