“As a nation, we derive vast benefits from competition. These cannot be taken for granted.”
Timothy J. Muris, chair of the US Federal Trade Commission 2001-04
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We thank Atalay Enghin, Edward Gardner, Charles I. Jones, and André Sapir for helpful comments and views. Niko A. Hobdari and Marialena Athanasopoulou provided the inputs featuring in Box 2 and Aleksander Rutkowski provided the data underlying Figure 3 in this paper. We are grateful to John MacCoy and Derek Mason for excellent research assistance.
The services outside the scope of the Directive are financial and insurance, network industries, transport, and health and government services. All of them with the exception of health and government services benefit from EU specific regulatory frameworks.
“Non-discrimination” means that regulations cannot discriminate according to nationality; “necessity” means that regulations must be justified by the public interest; and “proportionality” means that regulations must not go beyond what is strictly needed to preserve welfare.
Two related implications are that the neoclassical model needs a broad definition of capital to account for the observed differences in income per capita across countries and that the convergence to the steady state is rapid (See Jones, 2011, for a comparison of the pure and intermediate-goods-augmented neoclassical models along these two dimensions).
In the sense that each industry can employ the material and capital goods produced by other sectors.
Bouakez et al. (2011), Jones (2011a, 20011b), and Gopinath and Neiman (2013) show that, relative to one-sector models, the propagation mechanism of aggregate shocks (monetary policy, productivity, and exchange rates) is greater in models with sector linkages.
As shown by Kim and Kim (2006), these preferences help multi-sector models produce employment co-movement across sectors, a stylized fact of business cycle fluctuations. They also generate sizable intertemporal substitution effects, making labor more responsive to shocks.
Available on request.
We let dynare log-linearize these conditions around the non-stochastic steady-state.
The authors construct the barrier indicator for each country as the mean of restrictions prevailing in services sectors before and after the implementation of the Directive.
The sum of sector-specific shocks on aggregate GDP across sectors gives the combined impact of sector-specific TFP shocks on aggregate GDP and it is equivalent to the μ’1 multiplier reported in Jones (2011).
The amplification effect does not arise from a disproportionate increase in output in the sector where the shock originates, instead it arises because output in other sectors increases in response to the shock. For example, in response to the TFP increase in the wholesale and retail distribution sector, output in that sector increases by 1.2 percent, which would contribute around half of the increase in GDP.
The companion Professional Qualifications Directive (Directive 2005/36/EC), currently under review, aims for a smoother system of recognition of qualifications across countries, in particular by harmonizing minimum training requirements. As with the Services Directive, however, the related mutual evaluation exercise and the interpretation of the notion of public interest will continue to be the sole responsibility of governments.
The ECN gathers representatives of the European Commission and the competition authorities in EU countries.