The Role of Market Power in Economic Growth: An Analysis of the Differences between EU and US Competition Policy Theory, Practice and Outcomes

Posted by Social Science Research Network

The Role of Market Power in Economic Growth: An Analysis of the Differences between EU and US Competition Policy Theory, Practice and Outcomes

Stephane Ciriani (ORANGE) & Marc Lebourges (France Telecom)

Abstract:      The European Union has experienced relatively weak economic performance over the past fifteen years, notably compared to the US In order to restore investment, innovation, and therefore growth, the European Commission seeks to raise the level of static competition in all markets. The Commission’s economic policy is largely determined by its competition policy. This policy is derived from its doctrine on competition law, which regards the exercise of market power as a source of inefficiency and advocates that its effects should be banned. By contrast, the US competition authorities, under the influence of the Chicago School, consider that market power is a necessary incentive to invest and a fair return on investment. Recent findings in economic growth theory, which state that increased competition intensity may harm endogenous innovation, provide a theoretical basis to support the US approach and call for a review of European doctrine.

Continue reading…