International Economics Commons^™

This policy brief provides research results indicating that a lack of competitive selection contributes to the productivity stagnation in European business services. Competition between small firms and large firms in business services is found to be weak. Inefficiencies also persist within size classes, which indicates a lack of competitive pressure. Markets for business services appear to work best in countries with flexible regulation on employment change, and with low regulatory costs for firms that start-up or exit a business. Countries with more openness to foreign competition perform better in terms of competitive selection and productivity. Policy simulations show that many …