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  5. Regulation, Competition, and Market Power in Latin America and the Caribbean
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Regulation, Competition, and Market Power in Latin America and the Caribbean

Paper Session

Sunday, Jan. 5, 2025 1:00 PM - 3:00 PM (PST)

San Francisco Marriott Marquis, Foothill A
Hosted By: Latin American and Caribbean Economic Association
  • Chair: Sara Alexandra Wong Chang, Escuela Superior Politécnica del Litoral (ESPOL)

Competition in the Colombian Banking Sector

David Perez-Reyna
,
Universidad de los Andes
Tomás Rodríguez
,
Universidad de los Andes
Jorge Tovar
,
Universidad de los Andes

Abstract

The spread between loan and deposit rates negatively correlates with GDP per capita. This correlation may be due to the significant market power held by financial institutions. We use balance sheets from Colombian banks to analyze the introduction of a net stable funding ratio (NSFR). We find that it increased the Lerner index (a measure of market power) in the short term, signaling a higher exercise of market power. However, on average, the effect of NSFR on market power is negative. We posit a theoretical model to analyze the mechanism behind this result. Numerical results show that loan rates increase more than deposit rates when the NSFR is raised.

Competition Law and Regulations: Productivity Impacts in Latin American Manufacturing Firms

Sara Alexandra Wong Chang
,
Escuela Superior Politécnica del Litoral (ESPOL)
Marjan Petreski
,
University American College Skopje-North Macedonia

Abstract

This paper investigates the effects of competition laws and regulations on manufacturing firms' productivity in Latin American countries (LACs), addressing a gap in existing research. Leveraging firm-level panel data from the World Bank Enterprise Surveys across 14 LAC economies and competition law indicators from the Comparative Competition Law initiative, the study employs total factor productivity (TFP) measures to analyze the effects of competition laws on manufacturing productivity through key
mediators: size and distance to the frontier. Utilizing various empirical methodologies that address potential biases, the findings reveal a nuanced relationship between competition law stringency, enforcement practices, and productivity outcomes across different industries and countries. Results suggests heterogeneous effects of competition law and enforcement on productivity, with certain aspects (e.g., competition law authority interacted with size) showing a positive relationship with productivity, particularly when controlling for firm size, while stronger enforcement measures weaken the positive
association between competition law and productivity, potentially due to increased compliance costs and legal uncertainty. The study suggests a need for policymakers to strike a balance between regulatory stringency and enforcement in competition to avoid stifling innovation and hindering productivity growth, particularly in industries nearing technological frontiers. Accounting for industry-specific factors, are essential for fostering fair competition and market efficiency without unduly burdening businesses.

Title: Regulation, Competition, and Market Power in Telecommunications across Latin America

Renzo Clavijo
,
EAFIT University

Abstract

This study delves into the regulatory landscape and competitive dynamics in the telecommunications industry of five key Latin American countries: Colombia, Perú , México, Brazil, and Chile. Focusing on market concentration analysis and the identification of regulatory policies that may impact market competitiveness, the research aims to contribute insights to the discussion about telecommunications policy in the region. This article encompasses the analysis for both fixed and mobile services for each country in the sample. Employing descriptive analysis, this study explores potential relationships among the evolution of key variables, offering evidence on the intricate interplay between regulation, competition, and market power in the Latin American telecommunications industry. Preliminary findings reveal a notable market concentration in mobile services and a somewhat lower yet significant concentration in fixed services. In the countries analyzed so far Mexico y Peru, two leading companies in mobile services collectively control approximately 70% of the market. Besides, average revenue per subscriber does not display a clear downward sloping trend. This research presents evidence that could guide future regulatory decisions and market strategies in Latin America.

Discussant(s)
Renzo Clavijo
,
EAFIT University, Colombia
David Perez-Reyna
,
Universidad de Los Andes
Sara Alexandra Wong Chang
,
Escuela Superior Politécnica del Litoral (ESPOL)
JEL Classifications
  • L5 - Regulation and Industrial Policy
  • G2 - Financial Institutions and Services