Product Market Regulation Indicator Research Articles

The trade effects of product market regulation in global value chains: evidence from OECD and BRICS countries between 2000 and 2015

Global Value Chains (GVC) have reshaped the landscape of international trade. The quality and intensity of regulation significantly impacts firms' competitiveness and their ability to engage in GVC. Economic literature suggests that regulation of product market competition has a detrimental effect on trade by decreasing productivity, innovation, and economic growth. This paper expands existing knowledge on this relationship by examining the influence of product market regulation (PMR) on value-added trade flows in an augmented gravity model. We constructed a data panel with trade data from 40 OECD and BRICS countries in the period from 2000 to 2015 and combined it with an extensive multi-level indicator set on PMR developed by the OECD. By disentangling the PMR indicators, we account for the heterogeneity of regulation and potential different trade effects. Overall, our evidence suggests that PMR has a negative impact on trade. Further, our results indicate that the negative impact stems largely from barriers to trade and investment. For the BRICS, our results suggest the contrary: We observed an overall positive trade effect of PMR, mainly driven by barriers to trade and investment. Our results support identifying policy areas in which regulatory reform can improve the integration in GVC and emphasize different approaches to economic policy, particularly in emerging economies such as the BRICS. Moreover, the results underline the detrimental effects of increasing protectionism and tariff hikes, a phenomenon that we increasingly observe in recent years from the world’s largest economies, such as the United States and China.

Institutional convergence in Europe

Abstract This paper applies the statistical concepts of σ-convergence and unconditional β-convergence to institutional development within several country groups hierarchized to the degree of European integration (e.g., euro area). Two sets of indicators are employed to measure institutional development: first, the Worldwide Governance Indicators, and second, the product market regulation indicator of the OECD and the Doing Business distance to frontier indicator of the World Bank. The authors can clearly confirm institutional β-convergence within the EU and its aspirants, which is mainly driven by the new Member States and acceding, candidate, and potential candidate countries. However, euro-area countries converge only in the area of product market and business regulation— not in the area of governance. In fact, the authors show evidence for β-divergence in rule of law within the first twelve euro-area members. Concerning σ-convergence, the results are less clear. Only the EU including the EU-aspirants reduced the cross-country variance in all aspects of institutional development.

The Quantification of Structural Reforms: Extending the Framework to Emerging Market Economies

This paper estimates and quantifies the impact of structural reforms on per capita income for a large set of OECD and non-OECD countries. The findings suggest that the quality of institutions matters to a large extent for economic outcomes. More competition-friendly regulations, as measured by the OECDs’ Product Market Regulation (PMR) indicator improve economic outcomes. Lower barriers to foreign trade and investment help MFP. Lower barriers to entry and less pervasive state control of businesses boost the capital stock and the employment rate. No robust link between labour market regulation and MFP and capital deepening could be established. But looser labour market regulation is found to go hand in hand with higher employment rates. The paper shows that countries at different level of economic development face different policy impacts. Furthermore, PMR effects depend on the level of labour market regulations.

The impact of product market competition on GDP per capita growth in the EU countries: does the model of capitalism matter?

This article assesses whether the intensity of product market competition is a factor affecting economic growth (measured by the growth rate of real GDP per capita) and whether this impact depends on the model of capitalism. The study covers the 1997–2015 period and all EU28 countries. Product market competition is measured by two types of variables: product market regulation indicators and the number of enterprises. New elements in the analysis include, among others, nonlinear impact and overlapping observations. The regression equations are estimated on the basis of Blundell and Bond’s GMM system estimator. The results generally indicate that stronger product market regulations (and theoretically lower product market competition) are linked with faster growth of output. However, the impact of product market competition on economic growth depends on the type of capitalism. For post-socialist countries, unlike the Western European model of capitalism, more regulation tends to reduce the rate of economic growth.

Determinants of direct cross-border public procurement in EU Member States

The aim of this paper is to analyse the determinants of direct cross-border public procurement in the EU Member States. For this purpose, we use a unique dataset based on data published on Tenders Electronic Daily which covers public procurement contract award notices for the 2008–2012 period and consists of more than 30 variables. Among others, results of the econometric estimation suggest that the probability of awarding a contract cross-border depends positively on the value of the contract and negatively on the number of bids. Among awarding country characteristics, GDP per capita and trade-to-GDP ratio are found to positively impact the probability of a cross-border award. Our results also provide econometric evidence for predictions from the economic theory. We make the case for the importance of product market regulation indicators used as proxies for anticompetitive practices, such as regulatory protection of incumbent firms and barriers to foreign direct investment, as well as the scope of public enterprises, and show that they have a significant negative impact on the probability of a cross-border win.

Varieties of capitalism and varieties of globalization: comparing patterns of market deregulation

ABSTRACTMarket deregulation has been integral to economic globalization, but we do not know very much about the comparative dimension of reform, i.e., the performance of liberal and co-ordinated market economies. Co-ordinated market economies are often assumed to perform poorly in deregulation reform, while such reform is path-dependent to the liberal market economy model. The article compares the trajectory of market deregulation in these different ‘varieties of capitalism’. Drawing on the Organization for Economic Co-operation and Development's ‘product market regulation indicators', the analysis shows that co-ordinated market economies have implemented more extensive deregulation than have the liberal market economies.

Product Market Regulation: Extending the Analysis Beyond OECD Countries

In this paper the recently updated product market regulation (PMR) indicators are extended to a larger set of countries including several non-OECD members. It investigates regulatory patterns in this extended set of countries as compared to the OECD countries and analyses the link between regulation and growth. On average, regulation is more restrictive of competition in non-member countries than in the OECD area. However, there exists considerable heterogeneity within this country grouping as concerns the level of the regulatory stance and its composition as well as the potential past evolution of regulatory processes. Furthermore, growth regressions provide evidence that less restrictive product market regulation is conducive to growth. An improvement of ½ index points of barriers to entrepreneurship would translate into approximately a 0.4% higher average annual rate of GDP per capita growth. However, the results also suggest that for countries that are less advanced, the potential growth benefits of enhancing product market competition may be impaired by other structural weaknesses. In particular, some restrictions of foreign trade and investment might be beneficial for growth in early stages of development. La reglementation des marches de produits : etendre l'analyse au-dela des pays de l'OCDE Dans cet article, les indicateurs de reglementation des marches de produits, qui ont ete recemment mis a jour, sont etendus a de nombreux pays, dont plusieurs pays non-membres. Cet article examine la reglementation dans cet ensemble de pays et analyse le lien entre la reglementation et la croissance. En moyenne, la reglementation est plus restrictive pour la concurrence dans les pays non-membres vis-a-vis de la zone OCDE. Toutefois, il existe une heterogeneite considerable au sein de ce groupe de pays en ce qui concerne le niveau de reglementation et sa composition ainsi que l'evolution potentielle des processus de reglementation dans le passe. En outre, des estimations econometriques mettent en evidence qu'une reduction des obstacles a la concurrence est favorable a la croissance. Une amelioration d'un ½ point des obstacles a l'entrepreneuriat se traduirait par un taux annuel moyen de croissance du PIB par habitant qui serait d'environ 0,4% plus eleve. Cependant, les resultats suggerent egalement que pour les pays moins avances dans leur developpement economique, les avantages potentiels de croissance resultant d'un renforcement de la concurrence sur les marches de produits peuvent etre alteres par d'autres faiblesses structurelles. En particulier, certaines restrictions au commerce international et a l'investissement etranger pourraient etre favorables pour la croissance dans les premiers stades de developpement.

Ten Years of Product Market Reform in OECD Countries - Insights from a Revised PMR Indicator

This paper describes patterns and developments of regulation that potentially affect product market competition in OECD countries over the past decade. It uses the 2008 update and revision of the OECD indicators of product market regulation (PMR) that integrate to a larger extent than in the past information on sector-specific regulation and adapt a simpler and more transparent aggregation technique. The results show that OECD countries have extensively liberalised product markets over the past ten years and – as a consequence - convergence of regulation across OECD countries can be observed. However, reforms appear to have slowed in the most recent period (2003-2008) as compared with the earlier period (1998- 2003). Easing of product market regulation appears to have been driven to a considerable extent by reforms in sector-specific regulation, notably as regards the gas, electricity and telecommunications markets. Countries appear also to have followed consistent reform approaches. However, scope for further reform remains, especially as regards controls of governments over businesses, and as regards certain sectors such as professional services and retail trade. Dix ans de reformes sur le marche des produits dans les pays de l'OCDE : Un apercu sur la base d'un indicateur RMP revise Ce papier decrit les evolutions observees en matiere de reglementation potentiellement entravant le jeu de la concurrence sur les marches de produits des pays de l'OCDE au cours des dix dernieres annees. On utilise une version actualisee et revisee des indicateurs de reglementation des marches de produits (RMP) qui integre dans des proportions plus vastes que par le passe des informations sur les reglementations sectorielles et utilise une technique d'agregation plus simple et transparente. D'apres les resultats, les pays de l’OCDE ont considerablement liberalise leurs marches de produits depuis dix ans et – par consequence – la convergence des reglementations peut etre observee. Cependant, le rythme des reformes semble avoir ralenti ces dernieres annees (de 2003 a 2008) par rapport a la periode precedente (de 1998 a 2003). Sur l’ensemble de la periode, les reformes de la reglementation semblent avoir repose considerablement sur la reforme des reglementations sectorielles, notamment dans les marches du gaz, de l’electricite et des telecommunications. Les pays semblent avoir egalement introduit des reformes d'une facon coherente. Cependant, il existe encore des marges de manœuvre considerables, notamment en termes du controle exerce par l'Etat, et dans quelques secteurs, tels que les services professionnels et le commerce de detail.