Service Oligopolies and Australia's Economy‐Wide Performance

Monday, January 4, 2016

Service Oligopolies and Australia’s EconomyWide Performance

Rod Tyers Australian National University (ANU) – School of Economics; University of Western Australia – Department of Economics examines Service Oligopolies and Australia’s EconomyWide Performance.

ABSTRACT: Australia’s services industries now contribute almost fourfifths of gross domestic product. The microeconomic reforms of the 1990s left behind numerous regulated private service oligopolies that contribute onequarter. Using an economywide modelling approach that represents service oligopoly behaviour explicitly, the extent of sectoral interactions and the potential economywide gains from price cap regulation are assessed. Nonlinear interaction between oligopoly industries is shown to support economywide over sectoral analysis. Moreover, the results from the economywide modelling suggest that the cost of unabated oligopoly distortions would amount to onethird of Australia’s gross domestic product.

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