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GLOBAL FORUM ON COMPETITION Does competition kill or create jobs? Jean-Luc Schneider OECD Economics Department 29 October 2015

Countries where competition is higher have higher employment rates Employment rate, average 2000-2014 80 Correlation coefficient: -0.58 t-statistics: -3.97 75 ISL CHE 70 NOR NZL DNK SWE JPN NLD CAN 65 AUS GBR USA KOR ISR AUT PRT FIN IRL 60 DEU CZE SVN MEX EST LUX BEL 55 FRA SVK ESP ITA 50 HUN GRC POL 45 TUR 40 1 1.2 1.4 1.6 1.8 2 2.2 2.4 2.6 2.8 Product market regulation, average 2003, 2008 2

Network deregulation increases exit from and entry into these industries % After a typical reform Sample mean 25 20 15 10 5 0 Exit rate from network industries Entry rate into network industries Note: ETCR stands for energy, transport and communications regulation, measured with the OECD ETCR indicator. 3 Source: OECD calculations using national household surveys for Australia (HILDA), Germany (SOEP), Korea (KLIPS), Switzerland (SHP), the United Kingdom (BHPS&UKHLS) and the United States (PSID).

Network deregulation reduced the wage premium in these industries ETCR, points Wage premium, per cent 12 10 8 6 4 2 0 1985 1990 1995 2000 2005 2010 Note: ETCR stands for energy, transport and communications regulation, measured with the OECD ETCR indicator. Source: OECD calculations using national household surveys for Australia (HILDA), Germany (SOEP), Korea (KLIPS), 4 Switzerland (SHP), the United Kingdom (BHPS&UKHLS) and the United States (PSID).

Macroeconomic employment effects are positive after 3 years Change in aggregate labour force participation following an easing of product market regulation Bouis, R., et al. (2012), "The Short-Term Effects of Structural Reforms: An Empirical Analysis", OECD Econom ics 5 Departm ent Working Papers , No. 949, OECD Publishing, Paris.

Network pro-competition reforms increase jobs churn across the economy Note: ETCR stands for energy, transport and communications regulation, measured with the OECD ETCR indicator. The probability of becoming employed is calculated over people who do not have a job, including economically inactive persons. 6 Source: OECD calculations using micro-level data for 28 OECD countries from ECHP, EU-SILC and six national household surveys.

Pro-competitive reforms have stronger effects on less skilled individuals Note: ETCR stands for energy, transport and communications regulation, measured with the OECD ETCR indicator. The probability of becoming employed is calculated over people who do not have a job, including economically inactive persons. Source: OECD calculations using micro-level data for 28 OECD countries from ECHP, EU-SILC and six national household surveys.

Pro-competitive reforms play a key role in creating jobs Long-run effects on the employment rate (in % points) Reform areas Effect of a « typical reform » Unemployment benefits 0.5 Active labour market policies 0.4 Tax wedge 0.5 Wage bargaining process 0.3 Competition in network industries 0 .8 Source: Gal and Theising (2015) * Size of a typical reform is measured by taking the average over 5 years of policy changes that impact the outcome variable in a positive direction, observed over the sample period and countries covered by the estimation. 8

GLOBAL FORUM ON COMPETITION Does competition kill or create jobs? Jean-Luc Schneider OECD Economics Department 29 October 2015