Legal and Economic Issues in Completing the EU Internal Market for Services: An Interdisciplinary Perspective*

Abstract

We investigate, from an interdisciplinary perspective, the legal and economic consequences of the EU Services Directive, which was adopted in a revised version on 12 December 2006. Studies on the effect of its original version point to moderate macroeconomic effects. Compared with its initial version, the directive has undergone substantial changes, which have eliminated many core elements that would have triggered additional liberalization in services markets. As a result, the Services Directive has moved away from its economic motivation and is likely to miss its aim of completing the EU internal market for services. Copyright (c) 2009 The Author(s). Journal compilation (c) 2009 Blackwell Publishing Ltd.

Twentieth Century Growth

“…One reason is continued weakness of competition reflected in high price--cost mark--ups which have survived the introduction of the Single Market (Høj et al 2007). Addressing these issues by reducing the barriers to entry maintained by member states would have raised productivity performance significantly but governments still have considerable discretion to maintain these barriers notwithstanding the Services Directive (Badinger and Maydell 2009). Western Europe remains a tremendously rich and successful economy, despite the slowdown in its relative growth rate.…”

Long-Term Growth in Europe: What Difference does the Crisis Make?

“…One reason is continued weakness of competition reflected in high price-cost mark-ups which have survived the introduction of the Single Market (Hoj et al, 2007). Addressing these issues by reducing the barriers to entry maintained by member states would have raised productivity performance significantly but governments still have considerable discretion to maintain these barriers notwithstanding the Services Directive (Badinger and Maydell, 2009). It should also be noted that failure to deal with excessive regulation in professional services in particular has had adverse Source: Timmer et al (2010).…”

Empirical Evidence of the Introduction of the Services Directive on Microeconomic Productivity

“…The effect of the directive on product growth should be indirect via trade and FDI (Dettmer, 2015), or, more broadly speaking, the effect of liberalization on productivity should come through trade via economies of scale, specialization, knowledge and technology diffusion (Badinger and Maydell, 2009;Frankel and Romer, 1999), imitation and organization spill-overs (Monteagudo et al, 2012), improving allocation efficiency that forces companies into improving their productivity (model implemented by De Bruijn et al, 2008), and greater competition which lowers prices, increases productivity and supports efficient allocation (Dettmer, 2015). Overall, Corugedo and Ruiz (2014) call increased productivity due to increased competition a domestic transmission channel.…”