Thursday, March 14, 2013

Cost of monopoly profits - Mexican telecoms edition

An OECD review (pdf here) of the telecommunications policy and regulation in Mexico finds,
The OECD estimates that the lack of competition in Mexico cost the country USD 129.2 billion between 2005 and 2009., equivalent to USD 25.8 billion or an annual 1.8% of GDP... This estimates represents the opportunity costs of lack of competition in Mexico. It does not represent the profit or sales of any single firm. The figure is based on an analysis of the economic loss that Mexicans have suffered as a result of paying higher prices than they would have paid in a more competitive market. It also takes into account thee loss suffered by potential users who were deterred by high prices from subscribing to telecommunications services in Mexico. 
The econometric analysis is here. In a different context, Acemoglu and Robinson makes the point that Mexico has suffered a big net loss since Carlos Slim's latest net worth is only $79 bn.

1 comment:

Anonymous said...

Gulzar, how true are Sainath's claims on tax write-offs?