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

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.