Regulation and deregulation in industrial countries : some lessons for LDCs

The United States'experience with antitrust and with directive regulation in the rail, trucking, airline, and telephone sectors offers useful lessons for developing countries. The experience highlights the realities both of market failure and of the difficulties of implementing regulation to control it - and reveals that imperfect regulation may be no better than imperfect competition. Antitrust measures to regulate price fixing and to require approval for mergers above some threshold level of industrial concentration are straightforward to implement and have provided some gains in economic welfare. The regulation of price discrimination, restrictive vertical practices, and predatory pricing is administratively more difficult, and the potential gains are less clearly evident. In many situations, import competition can be an efficient alternative. Direct regulation of rail, trucking, airline, and telephone was frequently inefficient, the regulatory apparatus often lost sight of its original objectives, and the regulators were captured by the regulated. For rail and trucking regulation, the regulatory outcome probably was worse than it would have been under laissez-faire.