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Market Liberalization, Regulatory Uncertainty, and Firm Investment

Author

Listed:
  • Florian Baumann

    (Department of Economics, Eberhard Karls University Tübingen, Germany)

  • Tim Friehe

    (Department of Economics, University of Konstanz, Germany)

Abstract

Motivated by the German postal market, this paper analyzes the effects of regulatory uncertainty about labor costs for investment into 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 investment at the internal margin. As a consequence, the impact of regulatory uncertainty on competition in liberalized markets is the result of these two countervailing forces.

Suggested Citation

  • Florian Baumann & Tim Friehe, 2011. "Market Liberalization, Regulatory Uncertainty, and Firm Investment," Working Paper Series of the Department of Economics, University of Konstanz 2011-08, Department of Economics, University of Konstanz.
    • Handle: RePEc:knz:dpteco:1108
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    File URL: http://www.uni-konstanz.de/FuF/wiwi/workingpaperseries/WP_Friehe-8-11.pdf
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    Cited by:

    1. 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].
    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. 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.

    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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