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Japan's oligopolies: Potential economy wide gains from structural reforms |
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| Institution: | 1. Faculty of Liberal Arts, Sophia University, Japan;2. Business School, University of Western Australia, Australia;3. Research School of Economics, Australian National University, Australia;1. School of Business, Central South University, Changsha 410083, China;2. Institute of Metal Resources Strategy, Central South University, Changsha 410083, China;1. Centre Internacional de Mètodes Numèrics en Enginyeria, Esteve Terrades 5, E-08860, Castelldefels, Spain;2. Universitat Politècnica de Catalunya, Jordi Girona1-3, Edifici C1, E-08034, Barcelona, Spain;1. Board of Governors of the Federal Reserve System, Washington, D.C., USA;2. Corporación de Estudios para el Desarrollo (CORDES), Quito, Ecuador |
| Abstract: | Japan's slowdown preceded those in the other advanced economies and is therefore of global significance. While its initial causes were financial, a resurgence will depend on productivity growth, key determinants of which are investment and industrial structure. This paper focuses on the costs of a structure dominated by oligopolies and the potential gains from combined competition and tax reform. We first identify industry concentration levels and economic rents using firm specific data and then incorporate these in a calibrated economy-wide model. Simulations suggest that competition policy and more openness to investment in services could deliver 5–17% of additional GDP. These stimulate investment via returning external wealth. Gains are spread most evenly if competition policy is combined with company tax reform. This retains fiscal balance and improves the domestic purchasing power of all Japanese incomes. |
| Keywords: | Regulation Oligopoly Services Price caps Privatisation General equilibrium Industrial reform C68 D43 F41 L13 L43 |
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