Purpose of the CourseEmpirical findings from policy changes such as regulatory reforms, openness to global competition, introduction of competition into not-for-profit sectors, etc. also confirm that competition brings about productivity gains, consumers’ welfare gains, and long-run economic growth.
However, some studies suggest that it could take a long time for the producers and consumers to adjust themselves to the new environment with increased competition and to fully experience efficiency gains.
Analyses based on micro data show that firm dynamics (birth and death, growth and decline of individual firms) is a key component of innovation and aggregate productivity growth.
Dynamic efficiency gains from product market competition, however, can hardly be achieved without well-functioning factor markets which reallocate labor and capital of shrinking/exiting firms to entering/ growing firms.
There exist considerable interactions between product market competition and competition in labor and capital markets.