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

Author

Listed:
  • Frédéric Gonzales
  • Hildegunn Kyvik Nordås
  • Michel Lioussis

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.

Suggested Citation

  • Frédéric Gonzales & Hildegunn Kyvik Nordås & Michel Lioussis, 2021. "Measuring competition in services markets with pass-through and speed of adjustment," OECD Trade Policy Papers 258, OECD Publishing.
    • Handle: RePEc:oec:traaab:258-en
    DOI: 10.1787/10d92b8d-en
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    More about this item

    Keywords

    Cointegration; Pass-through rates; Price signals; Services trade restrictions;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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