The present inquiry on the wealth and welfare enhancing effects of competition is based on the traditional Coase programme of analysing the relationship between institutional arrangements and economic performance. It looks for the factors of success and the relevant side conditions when introducing the spirit of competition into a society. Based on theoretical considerations, data from industrial, developing, and transition countries, the author shows that the evidence of a positive effect is very clear. However, the way the system is actually used is much less convincing. Thus, a certain grey zone can be found which often relates to the reputation of a system that has been established for a long time. This implies that time is needed to capture the full positive effects of competition law. Furthermore, the problem that competition law should protect competition not competitors, and should rely more on dynamic than on static aspects seems to be important for developing and transition countries. Among the major obstacles in developing environments are rent seeking processes, especially corruption, and inefficient capital markets which tremendously limit the dynamics of an economy. These give hints on how to organise transition and reform processes. Small countries should have open economies to be able to explore their external economies – to isolate may be extremely counterproductive as competition in small markets is difficult to enforce.

This study makes an important contribution to the introduction of competition as a means of promoting the wealth of our global societies. It provides arguments to open economic regions to free markets, especially financial markets, and to integrate the world economy, because the resulting dynamics may overcome many obstacles of anticompetitive behaviour that may develop in more static environments. Thus, this work is an important contribution to our view that open societies and competition positively interact and promote the wealth of their people. It relates to the important topic of the Halle Institute for Economic Research on the interaction between institutional change and economic performance.