4.10.2—Market-based strategies
- Syllabus
- First assessment 2022
- Objective
- 4.10.2
- Level
- SL
Market-based development strategies change competition, ownership and entry rules
Market-based development strategies include trade liberalization, privatization and deregulation.
Trade liberalization reduces barriers to imports and exports; privatization transfers state-owned activity to private ownership; deregulation removes or simplifies rules restricting entry, prices or operations. Intended channels are stronger competition, market access, investment incentives, efficiency and innovation.
Example
Removing an import licence and simplifying firm registration may lower input costs and entry barriers, but a privatized utility without effective competition may simply replace a public monopoly with a private one.
Trace the exact rule or ownership change to behaviour, competition, prices, investment and access, then compare short-run adjustment with long-run capacity.
Market orientation is not absence of institutions: competition policy, property rights, regulation of natural monopolies, worker adjustment and environmental protection may still be necessary.