Publication: Competition Reform and Household Welfare: A Microsimulation Analysis of the Telecommunication Sector in Ethiopia
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2021-01
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2021-01-21
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This paper presents a novel method for estimating the likely welfare effects of competition reforms for both current and new consumers. Using household budget survey data from 2015/16 for Ethiopia and assuming a reform scenario that dilutes the market share of the telecommunications state-owned monopoly to 45 percent, the model predicts a 25.3 percent reduction in the price of mobile services and an increase of 4.6 million new users of mobile phone services. This reform is expected to generate a welfare gain of 1.37 percent among all consumers. Poverty rates are expected to decline by 0.31 percentage point, driven by a reduction of 0.22 percentage point for current consumers and 0.09 percentage point among new users. Inequality would increase by 0.23 Gini point since better-off consumers are more likely to reap the benefits of greater competition. This method represents a powerful tool for supporting the analysis of competition reforms in developing countries, particularly in sectors known for excluding significant segments of the population due to high consumer prices.
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“Araar, Abdelkrim; Rodriguez-Castelan, Carlos; Malasquez, Eduardo A.; Granguillhome Ochoa, Rogelio. 2021. Competition Reform and Household Welfare: A Microsimulation Analysis of the Telecommunication Sector in Ethiopia. Policy Research Working Paper;No. 9516. © World Bank. http://hdl.handle.net/10986/35030 License: CC BY 3.0 IGO.”
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