Intra-EU differences in regulation-caused administrative burden for companies

CPB's contribution to the EU's 2005 Competitiveness Report includes Worldscan simulations for several aspects of the EU's Lisbon Agenda. One of the simulations concerns the macroeconomic consequences of lowering the administrative burdens for companies throughout the EU. This paper provides data that describe the baseline situation of administrative burdens for companies in the EU member states. This research note defines the concept of administrative burden for companies, using the concept of a standard information event caused by mandatory information requirements. A systematic comparison is made for most of the present EU countries. Different procedures for quantifying and aggregating the costs of the administrative burden are presented.

Exports and productivity selection effects for Dutch firms

This study presents recently available data on the microstructure of Dutch exports and the relation between export participation and productivity at the firrm and establishment-level. We test whether recent theories of international trade with heterogeneous firms can explain the patterns in the Dutch data. Read here the accompanying press release. We find significant evidence that firms self-select into export participation, even after controlling for sector and firm-specific characteristics. In general, only the most productive Dutch firms participate in exports and foreign direct investment. In addition, we find evidence for the learning-by-exporting hypothesis once we control for the firm's distance to the international productivity frontier. Background document: CPB Memorandum 250

Business services and the Baumol disease

The business services industry represents a large and fast-growing chunk of the Dutch economy, approaching the size of the total manufacturing industry. The industry, however, has displayed stagnating productivity growth, accompanied in some years by a fall in productivity. Do these stylised facts imply that the Dutch economy is inevitably headed for the “Baumol disease”? Investigating this question, this paper reviews policy options that might improve the productivity record of the business services industry and strengthen its contributions to the productivity of client industries.business services, impact on macro-economic productivity growth

The future of the fence around the European labour market

In international forums the EU calls for freedom of movement for goods, services and capital. Freedom of movement of labour - labour migration in other words - is excluded from this claim, certainly in relation to medium- and low-skilled labour. This paper addresses two questions. Firstly, what are the effects of EU's restrictive labour migration policy on welfare within and outside the EU? Both welfare effects are found to be considerable. Secondly, is this policy sustainable over the longer term, say towards 2030? The paper evaluates foreseeable pressures on the fence around the EU labour market, coming from within and from outside the EU. The paper sketches policy options for dealing with the dilemmas that may arise from these pressures.labour migration; European Union; welfare; immigration policy

The market for cocoa powder

The paper analyses the forces that shape demand and supply processes in the market for cocoa powder. A brief statistical summary is given of the main trends in international demand and production, and the spatial shifts in cocoa processing. Ample attention is given to the role of technology substitution and price factors in production decisions. The paper separately analyses the role of price, income levels and government regulation in the demand for cocoa powder. In the final part of the paper, all preceding elements are brought together in an integrated simulation model of the cocoa processing industry, showing the interactions between the market for cocoa powder and other elements of the cocoa industry (cocoa, cocoa butter, cocoa liquor, chocolate). Empirical evidence is presented with regard to main parameters of the model.cocoa, cocoa powder, industry study, simulation model, intermediate products, government regulation

A different approach to WTO negotiations in services

International negotiations on the liberalisation of service trade are concentrated at non-tariff barriers (NTBs). National government measures form important obstacles for service providers when they want to access foreign markets. International studies predict substantial welfare benefits from removing trade obstacles for services. Negotiations on lowering these obstacles are complicated because government regulations are seldom strictly oriented at keeping foreign firms out their domestic service markets. Some of them (e.g. quantity-based restrictions) are clearly at odds with WTO principles. We argue however that in most cases regulators primarily aimed at correcting domestic market failures with disregard for the potential repercussions for foreign providers of services. In negotiations this problem can be approached by introducing economic necessity tests, but that is a very long and tedious process. We propose a different negotiation approach based on lessons learned from WTO negotiations on agricultural support measures.

Regulatory heterogeneity as obstacle for international services trade

International trade in services is hampered by non-tariff barriers that originate from national regulations. Not only the level of regulation in home or export country matters, but also the inter-country differences in regulation for service markets. Regulatory measures tend to affect fixed costs rather than variable costs. The fact that regulations often differ by market, means that the fixed costs of complying with regulations in an export market are in fact sunk market-entry costs. We prove that policy heterogeneity between countries has a negative impact on bilateral service trade. We develop a new index of bilateral policy heterogeneity, and apply it in a gravity model for explaining service trade among EU countries. The empirical results support our theoretical prediction: the degree of regulatory heterogeneity is inversely related to the level of bilateral service trade. Simulations for the EU show that if countries make more use of mutual recognition, bilateral trade in commercial services among EU countries could increase by 30% to 60%.

Business services and the changing structure of European economic growth

A pervasive trend that characterised the past two decades of European economic growth is that the share in the economy of commercial services, and particularly business services, grows monotonically, and this mainly to the expensive of the manufacturing sector. The structural shift reflects a changing and increasingly complex social division of labour between economic sectors. The fabric of inter-industry relations is being woven in a new way due to the growing specialisation in knowledge services, the exploitation of scale economies for human capital, lowered costs of outsourcing in-house services, and the growing encapsulation of manufacturing products in a 'service jacket'. Business services, which inter alia includes the software industry and other knowledge-intensive business services (KIBS), play a key role in many of these processes. We argue that in recent decades business services contributed heavily to European economic growth, in terms of employment, productivity and innovation. A direct growth contribution stems from the business-services sector's own remarkably fast growth, while an indirect growth contribution was caused by the positive knowledge and productivity spill-overs from business services to other industries. The spill-overs come in three forms: from original innovations, from speeding up knowledge diffusion, and from the reduction of human capital indivisibilities at firm level. The external supply of knowledge and skill inputs exploits positive external scale economies and reduces reduces the role of internal (firm-level) scale (dis)economies associated with these inputs. The relatively low productivity growth that characterises some business-services sectors may be a drag on the sector's direct contribution to overall economic growth. The paper argues that there is no reason to expect a "Baumol disease" effect as long as the productivity and growth spill-overs from KIBS to other economic sectors are large enough. Finally, the paper concludes by pinpointing some policy 'handles' that could be instrumental in boosting the future contibution of business services to overall European economic growth.

Liberalisation of the European services market and its impact on Switzerland

The European Commission's 2004 proposals for a Services Directive consists of measures to reduce or eliminate the obstacles of cross-border trade of services by introducing the 'country of origin' principle. It implies that regulation of the country of origin is relevant, and that the country of destination has no right to impose new regulation. Our results indicate that the introduction of the 2004 EU services directive in Switzerland would very much intensify the economic relations between the service industries of Switzerland and the European Union. We have investigated the direct effects of mutual liberalisation of services markets. These are positive, both for Switzerland and the EU. Swiss exports of commercial services to the EU could increase by 40 to 84 per cent, while Swiss foreign direct investment stocks in EU services industries could increase by 20 to 41 per cent. EU services exports to Switzerland may rise by 41 to 85 per cent, while EU direct investment stocks in Swiss service markets could rise by 29 to 55 per cent. This report estimates the quantitative economic implications of a possible decision by the Swiss government to fully adopt the European Commission proposals for a services directive.

Dynamic effects of European services liberalisation: more to be gained

Europe’s market for services is fragmented by many regulatory barriers. The Services directive proposed by the European Commission aims to integrate national services markets by reducing these barriers. Several studies indicate that bilateral trade and foreign direct investment in services could boost substantially. GDP and consumption could increase by 0.5% to about 1% on average in Europe. The effects for the Member States vary depending on the size of the barriers in their services markets and specialization. These results take account of scale effects, and forward and backward linkages in the economy, but ignore the effects of more competition on productivity and innovation in the long term. This paper assesses the channels though which an integrated European services market may generate these dynamic gains. Improved market access will stimulate competitive selection and productivity growth. Through trade and investment, knowledge spillovers will increase and innovation will be fostered. These channels are illustrated with quantitative evidence.trade openess; services; dynamic effects; European Union