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sGrowth, Flexibility and

Protection: The Results of Regulatory Reform in

OECD Countries

Scott H. JacobsJacobs and Associates,

An international firm specializing in regulatory reform

With partners in the Americas, Europe, and East Asia

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sOECD Regulatory Reform

PrincipleRegulatory quality, not deregulation, is the

driving principle behind reform today Deregulation where markets work better

than governments Re-regulation and new regulatory

institutions where markets cannot work without governments

More efficient government and social regulations to achieve high standards of health, safety and environmental protection at lower economic cost

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C osts of R egulation

F isca l co s tsto G o vern m e n ts

A d m in is tra tivep a p erw o rk

co s ts

C a p ita lco s ts

C o m plia n ce co s tsto b us in esses

a n d co nsu m e rs

D yn a m ic co s tsto eco no m icp e rfo rm a n ce

1.

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s Total annual compliance costs - average per SME per country

0

10,000

20,000

30,000

40,000

50,000

60,000

US

do

llar

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10- country average

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sI. Benefits of Regulatory Reform Boosts consumer benefits

reducing prices for services and products such as electricity, transport, and health care, and by increasing choice and service quality.

Improves competitiveness Reducing the cost structure of exporting and upstream sectors in regional and global markets.

Fosters flexibility and innovation Reduces risk of crisis due to external shocks

Increases job creation by creating new job opportunities, and by doing so reducing fiscal demands on social security, particularly important in aging populations.

Maintains and increases regulatory protections in areas such as health and safety, the environment, and consumer interests by introducing more flexible and efficient regulatory and non-regulatory instruments, such as market approaches.

Supports sustainable, non-inflationary growth

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s Sectoral effects of regulatory reforms

Price reductions in real terms (%)

Road transportGermany 30 France20

Mexico 25 United States 19

AirlinesUnited Kingdom 33 Spain 30

United States 33 Australia20

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Price reductions in real terms (%)Electricity

Norway (spot market) 18-26.2 United Kingdom 9-15.3

Financial servicesUnited Kingdom 70.4 United States 30-62.4

TelecommunicationsFinland 66.5 Japan 41.6

United Kingdom 63.6 Mexico 21.5

Korea 10-30.7

Sectoral effects of regulatory reforms

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sI. Benefits of Regulatory Reform Boosts consumer benefits

reducing prices for services and products such as electricity, transport, and health care, and by increasing choice and service quality.

Improves competitiveness Reducing the cost structure of exporting and upstream sectors in regional and global markets.

Fosters flexibility and innovation Reduces risk of crisis due to external shocks

Increases job creation by creating new job opportunities, and by doing so reducing fiscal demands on social security, particularly important in aging populations.

Maintains and increases regulatory protections in areas such as health and safety, the environment, and consumer interests by introducing more flexible and efficient regulatory and non-regulatory instruments, such as market approaches.

Supports sustainable, non-inflationary growth

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s Economy-wide effects of regulatory reform

GDP, long term effects (%) USA 0.9

Japan 5.6

Korea 8.6

Germany 4.9

Netherlands 3.5

France 4.8

Greece 9-11

Sweden 3.1

UK 3.5Spain 5.6

Source: OECD: various reports, 1997-2000

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sProduct market regulation: inward

oriented policies

Inward-oriented policies

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sUnderstanding regulatory

reformReform, well co-ordinated and planned, is not an ideological act, nor simply a concession to stronger markets that accelerates painful structural change. Instead, it is a means of managing necessary change so as to ease disruption and develop new opportunities for economic and social progress.