Imports, entry and competition law as market disciplines

Numerous countries have adopted or strengthened competition laws in the past two decades. At the same time, domestic industries in most countries are facing ever more intense pressure from imports. In this paper we study the impact of competition law on domestic competition for a large number of countries over time, controlling for the presence of imports and the number of domestic firms. We find that while industries that have higher import exposure or larger numbers of domestic firms tend to be more competitive, the direct effect of competition law on competition is insignificant. However, we also find that industries that operate under a competition law tend to have a larger number of domestic firms. This suggests that competition laws may have an indirect effect on domestic competition by promoting entry. (c) 2006 Elsevier B.V. All rights reserved.