Abstract
From the 1980s onwards, more and more countries have chosen for an economic policy, in which the role of the government should be reduced. With less government, i.e. lower tax and premium rates, lower deficits, and lower debts, with less regulation, and with less compliance costs, markets would function better and economic development would prosper. The revival of the US and UK economy—and later that of many other economies—seemed to support the rightness of this approach.
But with the Internet crisis around 2000 and the dramatic financial and economic crisis of 2007–2010, the whole picture has changed once again. Is this reliance on market forces really such a good thing and are less government, less rules and regulations really the right alternative to realize the most desirable pattern of economic development? What is the relationship between the level of compliance and the pattern of economic development? Has this approach helped countries to better deal with the impact of the recent economic crisis? These questions are dealt with comparatively, both between countries and over time, using data from World Bank and OECD. The results are contrary to what long was the ruling ideology: Less regulation has not been beneficial for economic development and also has not made countries better able to deal with the recent financial and economic crisis.
Even though these analyses have been rather rough and preliminary, the results produced in this chapter do show that a reduction of regulation has not been as beneficial to the economic performance, as many have believed so far.
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Notes
- 1.
See Chap. 6 in this book.
- 2.
Data used were from the Netherlands Bureau for Economic Policy Analysis (see Kox (2005), the OECD Product Market Regulation data, and the World Bank Doing Business data. For both last sources, data were taken from their internet sites.
- 3.
Data for any year have to read with a delay of about 2 till 3 years. So data presented in 2010 under the year 2011 are relevant for the period 2008–2009.
- 4.
In the first year, 2003, 133 countries were involved, with also not always a full data set available for the countries mentioned.
- 5.
Taken from the website http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html.
- 6.
The main sources of information used to construct the PMR indicators are the responses to the Regulatory Indicators Questionnaire provided by national governments in 1998, 2003, and 2008 and data published by the OECD and other international organizations. All these data have been extensively checked by OECD and government experts.
- 7.
The maximum level (most restrictive = 6) and the minimum level (no restrictions at all = 0).
- 8.
These indicator sets deal with starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business.
- 9.
In the years after the first publication both the number of indicators and of countries increased. Using the maximum number of indicators reduces the data set to just one year, with 33 instead of 36 indicators the time series contains 6 years of data, and with 17 indicators there are 7 years of data available. A regression between 17 and 36 indicators shows a correlation rate of 0.86. We therefore selected the 17 indicator data set as the most appropriate one.
- 10.
In formula, if V min is the minimum value found in any country for a particular indicator, V min is the maximum value in any country for that same indicator, and V i the value of that indicator for country I, then the score of this country is ((V i − V min)/(V max − V min)). The minimum value is 0 and the maximum value is 100. The outcome changes if the country’s value changes, or if the minimum and/or maximum value changes.
- 11.
In fact, these data are for 2002/2003, respectively, 2008/2009.
- 12.
There have been also calculations with population size as weight. The differences are only marginal.
- 13.
- 14.
For 2003 data were available for 133 countries.
- 15.
For GDP per capita the correlation rate is −0.21.
- 16.
For GDP per capita the correlation rate is 0.10.
- 17.
These years do coincide with the availability of data.
- 18.
These data are taken from the December 2010 Economic Outlook forecast.
Bibliography
CPB Netherlands Bureau for Economic Policy Analysis (2004), Reducing the administrative costs in the European Union. August 2004.
Esping-Andersen, G. (1990) Three Worlds of Welfare Capitalism. Princeton University Press, New Jersey.
European Commission (2006), First progress report on the strategy for the simplification of the regulatory environment, November 2006.
Kox, H., (2005), Intra-EU differences in regulation-caused administrative burden for companies, The Hague: CPB Memorandum 136.1.
OECD (2010), Economic Outlook 88, Paris.
Paridon, C.W.A.M. van, and S. Jhagroe (2009), Reduction of compliance costs. An international perspective, in: A. Nijsen a.o, Business ??, Heidelberg: Springer, pp.
World Bank (2010), Doing Business 2011. Making a difference for entrepreneurs, Washington: World Bank.
Websites
OECD Product Market Regulation http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html
OECD Economic Outlook statistics http://stats.oecd.org/Index.aspx?DataSetCode=EO88_INTERNET
World Bank Doing Business http://www.doingbusiness.org/
Acknowledgments
The author wants to thank William Klaver for his help with the data analysis.
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van Paridon, K. (2012). Against the Tide? On the Development of Regulative Costs Over Time in Times of Crisis and Its Possible Impact on Economic Development. In: Alemanno, A., den Butter, F., Nijsen, A., Torriti, J. (eds) Better Business Regulation in a Risk Society. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-4406-0_8
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