SERVICEGAP Discussion Paper No. 9.
Excess regulation is often considered to be a barrier to growth because it stifles competition and prevents the market from functioning as it should in the allocation of resources. Empirical analysis of regulation and economic performance has traditionally focused on the most heavily-regulated service industries. However, the „knock-on‟ impacts for other sectors in the economy as a result of the regulation of key services sectors has been less well explored. In this paper we address this by looking at the widespread effects that regulation of service sectors can have across other segments of the economy, in particular within market services. The effects of de-regulating services have often been found to be ambiguous; in part because these are likely to be highly heterogeneous given the prevailing differences in regulatory conditions across countries and industries. We examine whether productivity differentials between countries relate to the lack of competition in key service sectors, and also the extent to which other economic outcomes such as high-technology investment (ICT) and employment are affected.