Abstract
Network sectors such as railways, roads, seaports, energy, and telecommunications, and many other regulated sectors, provide essential services through network infrastructure. These industries have been traditionally vertically integrated, wherein a single firm both owns and manages the network infrastructure or the non-competitive activities and operates the downstream or activities with the possibility of competition. Theoretically, introducing competition into competitive activities and leaving non-competitive activities to be owned and managed by a single natural monopoly firm would enhance the performance of network industries. While recent cross-country and microeconomic research suggests that the consequences of regulation on industries are significant and inappropriate regulation can impact an economy’s productivity performance in several ways, the relationship between reforms and macroeconomic outcomes is sometimes ambiguous, and the empirical evidence is heterogeneous and scanty. The study adopted a quantitative research methodology applying panel regression analysis to assess the impact of pro-competition regulatory reforms, as measured by the PMR Indicator, in network sectors on economic growth in 32 OECD countries between 1996 and 2018. The panel data regression analysis shows that GDP per capita growth is found to have a positive relationship with Gross Fixed Capital Formation (GFCF), Research and Development (R&D), employment, the PMR Indicator, Foreign Direct Investment (FDI), trade openness, while displaying a negative relationship with inflation. However, the panel data regression results showing a positive relationship between GDP per capita growth and the Product Market Regulation (PMR) Indicator were unexpected, as they are inconsistent with the established economic theory.