Summary

Privatization, Deregulation and the Macroeconomy focuses on the macroeconomic consequences of microeconomic rigidity in the markets for goods or services and the reforms necessary to create economic dynamism.

Peter van Bergeijk and Robert Haffner address questions of how market structure, competition policy, over-regulation and collusive behaviour may influence macroeconomic performance. Drawing on many examples from the OECD countries (most notably, Germany, New Zealand, Australia and the Netherlands), Eastern Europe and the Third World, the authors show how economic policies intended to provide greater flexibility can be analysed. The authors examine the diagnosis or measurement of product market inertia at the mesoeconomic level and its consequences at the macroeconomic level such as employment, per capita income growth and price stability.

In Privatization, Deregulation and the Macroeconomy , Peter van Bergeijk and Robert Haffner deal not only with practical policy matters but also with the theoretical issues of how to determine price rigidity (hysteresis on the product markets) and their macroeconomic implications. This book will be welcomed by economists interested in industrial organization, macroeconomics, neo Keynesianism, development economics and transitional economies and will also be of interest to policymakers.

Choice Review

The authors, research economists in the Economic Policy Directorate of the Netherlands Ministry of Economic Affairs, grapple with a real issue facing policy makers and their economic support staff: the macroeconomic impact of removing rigidities at the microeconomic level. For example, they wonder how much the liberalizing of product markets, either through allowing more foreign competition or removing restraints on domestic competition, will affect the growth rate of the domestic economy. (Their tentative conclusion is an annual increase in production growth on the order of 0.3-1 percent.) Van Bergeijk and Haffner perform a useful service in reviewing and employing much of the current industrial organization literature peripherally related to their subject and dealing with a more limited body of macroeconomic writings. They also survey the empirical evidence primarily deriving from OECD countries. Their conclusions, however, are properly hesitant for "theoretical debates on these matters have by no means been settled yet, not the least because empirical evidence is scant (and if available it is often inconclusive)." And if this is true for OECD countries, how much more is this qualification applicable to the transition economies of Eastern Europe and the developing countries of the world. Hence, as the authors realize, this book should properly be considered a call for further effort in this area. Graduate, faculty, and professional collections. J. Prager New York University