Anticompetitive agreements, particularly hardcore cartels, harm consumers in developed, as well as in developing countries. In addition, cartelized industry sectors lack competition which certainly reduces competitiveness in the long run and may have a negative impact on the overall performance of a country's economy. The objective of competition law and policy is to eliminate such anticompetitive practices, including hardcore cartels, thereby enhancing consumer welfare and contributing to a country's competitiveness. Nonetheless, some question whether competition law enforcement in fact positively impacts economic growth in developing countries.
To date, research on this question has mainly taken a qualitative approach without measuring the actual harm caused by cartels in developing countries. Within the framework of UNCTAD's Research Partnership Platform on Competition Law and Consumer Protection Policies, the present research project, under the leadership of the Toulouse School of Economics, aims to bridge this gap by carrying out a quantitative assessment of economic effects of cartels in developing countries.
The proposed research project will also provide the required economic data allowing for a quantitative assessment of the potential for competition law enforcement to contribute to economic development. Competition authorities in developing countries will have a practical interest in the respective results for their advocacy efforts. Furthermore, competition authorities in developing countries may wish to take advantage of the proposed methodology for their own cartel investigations as it will reduce the data required to estimate the effects of cartelization, for example, to measure price overcharges.
The project's objectives can be summarized as follows:
Gaining a better understanding of the types, characteristics and functioning of the cartels affecting developing countries as a prerequisite to measure their impact on economic development;
Measuring the impact of cartels on economic development by using econometric methodology.
The project will be carried out in three phases, as described below:
Phase 1: Data collection
During the first phase a database on hardcore cartels in selected developing countries shall be created. For this purpose, competition authorities in these countries will be asked to fill out a questionnaire on the basic micro and macro data necessary for simulations.
Phase 2: Calibration and simulation
Based on the received data, the hypothetical market conditions without cartelizing conduct will be simulated and compared to the existing conditions which are characterized by the presence of cartels. This will allow the calculation of price overcharges, losses in consumer welfare and possibly outputting effect.
Phase 3: Estimation of the impact of cartels on economic growth
By extrapolating results obtained in phase 1 onto the macro-economic level, the minimum level of losses in economic growth due to cartelization shall be estimated.
Current phase of implementation
The project is currently in phase 1. The following countries have been selected for the purpose of gathering the required economic data: Argentina, Barbados, Belarus, Benin, Brazil, Burkina Faso, Cameroon, Chile, China, Colombia, Costa Rica, Egypt, El Salvador, Fiji, Gabon, Indonesia, Jamaica, Kazakhstan, Malawi, Mali, Mexico, Moldova, Morocco, Namibia, Pakistan, Peru, Russia, Senegal, South Africa, Suriname, Tanzania, Thailand, Tunisia, Turkey, Ukraine, Uzbekistan, Venezuela, Zambia, Zimbabwe.
Professor of Economics
Toulouse School of Economics
PhD student at Toulouse School of Economics
Dr. Graham Mott
Economic Affairs Officer
Competition and Consumer Policies Branch (CCPB)