OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Implicit Regulatory Barriers in the EU Single Market

New Empirical Evidence from Gravity Models

Gravity models are used to explore the determinants of trade, making use of fixed effect linear estimators and a Poisson estimator (as in Santos Silva and Tenreyro, 2006) with fixed effects. Beyond usual determinants of trade such as GDP, distance, contiguity, free trade areas and language, this analysis mainly focuses on the role of product market regulation stringency and heterogeneity, and on the role of employment protection. The Single Market has a large positive impact on trade. A broad reform package that would align Product Market Regulation (PMR) indicators to the average of the top half of the best performers and would cut regulatory heterogeneity by one fifth could increase trade intensity within the EU by more than 10%. This analysis also makes use of subcomponents of the PMR indicator (by field of regulation) and the OECD Energy, Transport and Communications Regulation (ETCR) indicator (by sector) to focus on elements on the regulatory issues that matter most for trade. In particular, the stringency of airline and telecom regulations has an adverse effect on trade intensity. Empirical findings on the impact of employment protection legislation on trade intensity are somewhat mixed. This Working Paper relates to the 2014 OECD Economic Survey of the European Union (www.oecd.org/eco/surveys/economic-survey-european-union.htm).


Keywords: EU single market, product market regulation, gravity model, trade
JEL: F15: International Economics / Trade / Economic Integration; F14: International Economics / Trade / Empirical Studies of Trade; F10: International Economics / Trade / Trade: General; K20: Law and Economics / Regulation and Business Law / Regulation and Business Law: General
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