Stephen Weymouth, Ph.D. Candidate, UCSD

Dissertation Research

"Competition Politics: A Political Economy of Business Regulation in Developing Countries."

Abstract: As tariffs and capital controls have fallen, research in international political economy is beginning to examine a host of behind-the-border obstacles to trade and investment, including the anticompetitive practices of incumbent businesses. My dissertation offers one of the first explanations of variation in competition policies, defined as the policies and institutions that regulate the entry of firms---domestic and foreign---into an industry, among developing countries. I argue that the salient political cleavage pits insiders versus outsiders: a rent-preserving alliance of incumbent producers and affiliated labor opposes robust competition policies that erode its market dominance; a pro-competition coalition of consumers, unorganized workers, and entrepreneurs favors reform. A simple formal model illustrates that policymakers' commitment to competition policy depends on the incentives generated by political institutions, which influence the responsiveness of votes to economic competition.

I test the empirical implications of the argument at several levels of analysis. First, I develop an original dataset measuring variation in competition (antitrust) agency design and independence in 129 developing countries covering the period 1975-2006. Results from a variety of statistical tests support the hypothesis that competition for political office encourages delegation of regulatory authority to effective competition agencies. In line with my theory, the results also suggest that party-centered electoral institutions favor the interests of the rent-preserving alliance by lowering the costs of lobbying. I do not find that competition policy reform accompanies trade and capital account liberalization, however, suggesting that persistent anticompetitive practices may help explain why the globalization of trade and finance has not lead to economic growth in many developing countries.

Another chapter uses firm-level survey data from a large sample of countries to test the determinants of firms' lobbying influence. The results support the proposition that firms in concentrated industries, and those organized in trade associations, are more likely to overcome collective action hurdles to influence policy. Case studies from Mexico, Colombia, and Argentina employ an interrupted time-series research design to identify how the introduction of competition policy reform affects industrial evolution. I find that product market competition increases with the government's commitment to competition policy effectiveness.