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2006 OECD Economic Surveys: Luxembourg 2006

image of OECD Economic Surveys: Luxembourg 2006

This 2006 OECD review of Luxembourg's economy examines the challenges Luxembourg is facing with regard to slowing economic growth, public finances, employment, education achievement and product market competition. It finds that Luxembourg has regained its footing after a slowdown at the start of the decade and that the financial servies sector, which accounts for one-third of economic activity, has renewed confidence. But there is deterioration in the fiscal position, weakening of the pension system, and growing unemployment all of which could be improved through enhanced human capital development and strengthened product market competition.

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Increasing Product Market Competition to Boost Productivity

Being a small economy with open borders and small travelling distance to neighbouring countries, Luxembourg already enjoys many of the gains coming with competitive pressures on product markets. However, several segments of the economy remain sheltered from competitive pressures. The recent introduction of the Competition Law should be used as a vehicle to reduce these remaining regulatory barriers. This chapter identifies three sectors where the competition authorities could play their essential role of promoting competition in the economy. First, easing the regulation of professional services, a relatively important sector in terms of employment, could foster competition and hence create beneficial effects on, currently adverse, productivity developments.

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