Restrictive business

OECD Observer

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Does the level of government regulation affect a country’s economic performance? A first step in finding the answer is to assess the level of restrictions before looking at their effect. Consider regulations that constrain competition in product markets. These fell in all OECD countries in 1998- 2003, according to Going for Growth.

Particularly sharp declines were recorded in Finland, Belgium and Korea, as well as in the former Soviet bloc countries. However, despite good progress, many of these countries still retain a high degree of restrictive regulation compared to the rest of the OECD, with Poland having particularly high levels of state control, product market regulation and barriers to foreign trade and investment. Still, their levels of restrictiveness have fallen sharply since 1998.

Other countries with relatively restrictive product market regulation include Turkey, which is notable for its barriers against entrepreneurship. France, one G7 country whose state controls stand out, according to Going for Growth, also suffers from restrictive barriers to entrepreneurship despite making good progress since 1998. But its level of regulation in foreign trade and investment is about average. The least restrictive countries overall for product markets are Australia, the UK, Iceland, Ireland and the US. Australia is notable for its low level of state control in product markets, but when it comes to trade and investment, Australia’s level of regulation control is relatively high.

For more detail, see "Going for Growth: Getting the strategies right", by Jean-Philippe Cotis, OECD Chief Economist, visit www.oecd.org/eco/pmr or contact observer@oecd.org.

©OECD Observer No 249, May 2005




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