Does the introduction of competition improve cost efficiency? The case of a state-owned telecommunications company

This paper examines the cost structure of the Telephone Organization of Thailand (TOT) with particular interest in the 1993 concessions that allow private companies to enter the market. Our empirical evidence demonstrates that the concessions generated an upward shift for both long run and short-run cost curves and this shift is likely to be caused by the reduction in scale economies in the post-concession period. The estimations of partial elasticities of substitutions show that labour is a substitute for capital and materials but capital and material are complements. In addition, the price elasticity of labour is greater than those of capital and material (in absolute terms), which reflects the firm's greater sensitivity in labour employment.