Productivity, Economic Dynamism and the “Failure of Competition” Narrative*

Productivity growth has declined in Australia and other developed countries over the past two decades. It has been argued that reduced dynamism and the failure of competition at an economy-wide level is to blame, leading to calls for broad competition policy reforms. In this paper we consider the theoretical and empirical evidence to support this “failure of competition” narrative. We find that the evidence, at best, is ambiguous. Competition failures in some areas support the need for reform, but the competition landscape across Australia is complex and there is no simple link between indicators of competition, such as concentration levels; indicators of reduced dynamism, such as falling business investment, and falling productivity growth.