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Product Market Reforms in EU countries. Are the methodology and evidence sufficiently robust?

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  • Jacques Pelkmans

    (Senior Research Fellow, CEPS (Brussels); Visiting Professor, College of Europe (Bruges))

Abstract

In the EU of today, economic policies, competition policy and regulation are expected to be 'evidence-based'. Since the late 1990s, this has also become possible for 'regulation'. The purpose of the present paper is to discuss critically the most prominent empirical approach to the measurement of regulation: the OECD PMR indicators (PMR = product market regulation). In EU regulatory reform debates and their economic underpinning, these PMRs have been heavily used. The paper sets out what exactly product market reforms are and the empirical regulatory indicators which have been developed by the OECD, the World Bank and others. The prominence of the OECD PMRs constitutes a good reason for zooming in on them. Note that these merely concern goods and services markets, together 'product markets'. The considerable merits of the PMRs are discussed first. No less than nine advantages are identified. However, the remainder of the paper is devoted to a series of omissions, weaknesses and shortcomings (up to ten, in total) which, broadly spoken, have the unfortunate effect that EU countries' goods and services markets would empirically look more restrictively regulated than they really are, compared to other OECD countries. PMRs have two vintages, one based on the period 1997 – 2005 and an improved 'integrated' PMR developed over 2006 – 2009. The latter constitutes an improvement and does reduce or eliminate some of the shortcomings of the first PMR indicators. Nevertheless, the systemic EU-neglect bias is not addressed and remains a disturbing facet. Before rushing to the policy inference that the neglect of EU instruments as well as fundamental rights (like free movement and the right of establishment) renders the PMRs too high (i.e. markets seem more restrictive than they are), so that therefore market reforms can be softened or put on the backburner, one ought to realize that the measuring of the numerous services restrictions (also in the PMR, integrated or not) is still seriously deficient. Thus, services markets might well have to be reformed more 'deeply'. Moreover, reforms are also necessary in national labour markets and in some elements of 'governance', aspects not covered in the paper.

Suggested Citation

  • Jacques Pelkmans, 2010. "Product Market Reforms in EU countries. Are the methodology and evidence sufficiently robust?," Bruges European Economic Research Papers 17, European Economic Studies Department, College of Europe.
  • Handle: RePEc:coe:wpbeer:17
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    References listed on IDEAS

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    Cited by:

    1. Philippon, Thomas & Gutierrez, German, 2018. "How EU Markets Became More Competitive Than US Markets: A Study of Institutional Drift," CEPR Discussion Papers 12983, C.E.P.R. Discussion Papers.
    2. Albertini, Julien & Terriau, Anthony, 2019. "Informality over the life-cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 105(C), pages 182-202.
    3. Gutierrez, German, 2019. "The Failure of Free Entry," CEPR Discussion Papers 14219, C.E.P.R. Discussion Papers.
    4. Anderton, Robert & Di Lupidio, Benedetta & Jarmulska, Barbara, 2020. "The impact of product market regulation on productivity through firm churning: Evidence from European countries," Economic Modelling, Elsevier, vol. 91(C), pages 487-501.
    5. Nicole Herweg & Stefan Wurster & Kathrin Dümig, 2018. "The European Natural Gas Market Reforms Revisited: Differentiating between Regulatory Output and Outcome," Social Sciences, MDPI, vol. 7(4), pages 1-19, April.
    6. Paolo Guerrieri & Sara Bentivegna (ed.), 2011. "The Economic Impact of Digital Technologies," Books, Edward Elgar Publishing, number 14361.
    7. Bianka Dettmer, 2012. "Business services outsourcing and economic growth: Evidence from a dynamic panel data approach," Jena Economics Research Papers 2012-049, Friedrich-Schiller-University Jena.

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    More about this item

    Keywords

    market regulation; market integration; regulatory reform; regulatory indicators;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • F15 - International Economics - - Trade - - - Economic Integration

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