Benefits and spillovers of greater competition in Europe

Description

"Using a general-equilibrium simulation model featuring nominal rigidities and monopolistic competition in product and labor markets, this paper estimates the macroeconomic benefits and international spillovers of an increase in competition. After calibrating the model to the euro area vs. the rest of the industrial world, the paper draws three conclusions. First, greater competition produces large effects on macroeconomic performance, as measured by standard indicators. In particular, we show that differences in competition can account for over half of the current gap in GDP per capita between the euro area and the US. Second, it may improve macroeconomic management by increasing the responsiveness of wages and prices to market conditions. Third, greater competition can generate positive spillovers to the rest of the world through its impact on the terms of trade"--Federal Reserve Board web site.

Description

"Using a general-equilibrium simulation model featuring nominal rigidities and monopolistic competition in product and labor markets, this paper estimates the macroeconomic benefits and international spillovers of an increase in competition. After calibrating the model to the euro area vs. the rest of the industrial world, the paper draws three conclusions. First, greater competition produces large effects on macroeconomic performance, as measured by standard indicators. In particular, we show that differences in competition can account for over half of the current gap in GDP per capita between the euro area and the US. Second, it may improve macroeconomic management by increasing the responsiveness of wages and prices to market conditions. Third, greater competition can generate positive spillovers to the rest of the world through its impact on the terms of trade"--National Bureau of Economic Research web site.

Subjects

Series Statement

• NBER working paper series ;
• working paper 10416
• Working paper series (National Bureau of Economic Research : Online) ;
• working paper no. 10416.

Links

• http://papers.nber.org/papers/W10416
• URL

Other Editions

• Benefits and spillovers of greater competition in Europe: a macroeconomic assesmentElectronic resourceNational Bureau of Economic Research2004-01-01
• Benefits and spillovers of greater competition in EuropeElectronic resourceFederal Reserve Board2004-01-01
• Benefits and spillovers of greater competition in EuropeElectronic resourceFederal Reserve Bank of New York2004-01-01