the largest gains in both absolute and relative terms in comparison with poorer households. Specifically, the combined monetary gains of the top consumption decile will be approximately 2.0 percent, compared with 0.4 percent among the lowest consumption decile (figure 4).<sup>28</sup> These welfare gains among current and new users will also translate into an overall reduction in the poverty rate of 0.31 percentage point and an expected increase in inequality of 0.23 Gini point.

**Figure 4. Relative Incidence of Greater Competition, Mobile Services**

<!-- Start of picture text --> 2.5%<br>2.0%<br>1.5%<br>1.0%<br>0.5%<br>0.0%<br>1 2 3 4 5 6 7 8 9 10<br>Consumption decile<br>New users relative welfare monetary incidence (percentage)<br>Current users relative welfare monetary incidence (percentage)<br>(percent)<br>Relative welfare monetary incidence<br><!-- End of picture text --> _Source:_ Elaboration based on data derived from the WELCOM Stata Tool and the 2015/16 HCES; see CSA 2018. _Note:_ Relative welfare is the per capita welfare incidence, divided by per capita expenditure. Expenditure estimates were carried out by running a quantile regression model and random imputation of residuals. Expenditure estimates were also carried out using random imputation and calculating the average expenditure by primary sampling unit. These serve as lower- and upper-bound estimates. These have been omitted for simplicity.

# **5. Conclusions**

This paper proposes a practical microsimulation approach to assessing the distributional impact of enhancing market competition in key sectors of economic activity. The approach combines data from household budget surveys with the parameters of reform scenarios in selected markets to estimate the welfare gains among current and new consumers likely to benefit from enhancing competition. This novel approach is applied to the case of the mobile telecommunication market in Ethiopia, which has been dominated by a state-owned monopoly until recently. The results show that a reform scenario that reduces the market share of the monopoly to 45 percent would be associated with a 25.3 percent drop in the prices of mobile services and an increase in the number of new users by 4.6 million. The

> 28 To calculate the money metric welfare of a price decrease, the expected expenditures of new entrants are assumed to be equal to that of the current user group. See the WELCOM user manual for more information; see WELCOM Stata Tool, Global Solutions Group on Markets and Institutions for Poverty Reduction and Shared Prosperity, Poverty and Equity Global Practice, World Bank, Washington, DC, http://dasp.ecn.ulaval.ca/webwel/welcom.html. The change in well-being is equal to the negative value of the product of the estimated change in the proportion of users, the average expected expenditures among new users of the good of interest, and the observed change in price. Average expected expenditures among new users are estimated by running a quantile regression model and random imputation of the residuals for those households with positive expenditures. mcema also provides the option to run a linear regression to estimate these expenditures. Please refer to Rodríguez-Castelán et al. 2021 for a detailed discussion.

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