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Market Liberalization, Regulatory Uncertainty, and Firm Investment

Author

Listed:
  • Baumann Florian

    (Eberhard Karls University Tübingen,Tübingen, Germany)

  • Friehe Tim

    (University of Konstanz,Konstanz, Germany)

Abstract

This paper analyzes the effects of regulatory uncertainty regarding labor costs on investment in a liberalized market. We distinguish between the external investment margin (market entry) and the internal investment margin (technology), and establish that regulatory uncertainty affects these margins differently, encouraging market entry, but discouraging technological investment. As a consequence, the impact of regulatory uncertainty on competition in liberalized markets is a combination of these two countervailing forces.

Suggested Citation

  • Baumann Florian & Friehe Tim, 2012. "Market Liberalization, Regulatory Uncertainty, and Firm Investment," German Economic Review, De Gruyter, vol. 13(3), pages 352-361, August.
    • Handle: RePEc:bpj:germec:v:13:y:2012:i:3:p:352-361
    DOI: 10.1111/j.1468-0475.2012.00564.x
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    Cited by:

    1. Cristian BUSU & Alexandra Cătălina NEDELCU, 2015. "Specific Features Of Postal Service Market Liberalization," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 8, pages 291-295, June.
    2. Haehl, Christian & Spinler, Stefan, 2018. "Capacity expansion under regulatory uncertainty:A real options-based study in international container shipping," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 113(C), pages 75-93.
    3. Bossler, Mario & Gürtzgen, Nicole & Lochner, Benjamin & Betzl, Ute & Feist, Lisa & Wegmann, Jakob, 2018. "Auswirkungen des gesetzlichen Mindestlohns auf Betriebe und Unternehmen," IAB-Forschungsbericht 201804, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    Regulatory uncertainty; investment; market entry; minimum wage;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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