What are the OECD Product Market Regulation Indicators
Introduction to the PMR indicators
Product market regulation: A building block for a healthy economy
Vibrant competition is an essential component of a healthy economic environment, as it fosters cost efficiency and stimulates productivity
Having a regulatory environment that encourages effective competition is essential to long-term growth
Laws and regulations can promote competition by removing unnecessary barriers to entry, expansion and exit of firms and avoiding the creation of new barriers
Competition improves economic outcomes
Academic studies, as well as reports from OECD and other international institutions, show that a competitive economy delivers better results in terms of:
– Lower prices and greater choice
– Business dynamism
– Productivity growth
– More employment and dynamic labour markets
– Greater investment
– More innovation
Measuring regulatory barriers to competition
Turning qualitative information on regulatory set-up into quantitative indicators is needed to
– better identify areas of weaknesses regulatory weaknesses and select areas for pro-competitive reforms, and
– assess links between a competition-friendly regulatory environment and macro variables
The OECD PMR Indicators
To address the need to measure the extent to which a country’s laws and regulations foster productivity-enhancing competition, in 1998 the OECD developed:
The Product Market Regulation Indicators
The exercise has been repeated at 5-year intervals since then. Initially, the exercise included only OECD member countries, but over time the coverage has been considerably expanded
Content
of the PMR indicators
Coverage of the 2023 PMR indicators
The PMR indicators are constructed from a large database on laws and regulations in force in a country
This database includes information on laws and regulation across:
❑ A number of network sectors
❑ A number of service sectors
❑ A number of cross-sector regulatory domains
Network sectors
❑ Natural Gas and Electricity
❑ Mobile and Fixed E-communications
❑ Transport (freight and passengers) by:
Rail
Air
Road
Water
❑ Retail Distribution
Service Sectors
❑ Retail Sales of Medicines
❑ Professional Services
✓ Lawyers
✓ Notaries
✓ Accountants
✓ Architects
✓ Civil Engineers
✓ Real Estate Agents
New Sector: Digital Markets
❑ Regulation of Digital Markets
Introduced in 2023
Horizontal regulatory domains
❑ Design and Evaluation of New and Existing Regulations
❑ Rules on Stakeholder Consultation
❑ Lobbying Regulation
❑ Scope and Quality of the Governance of SOEs
❑ Public Procurement
❑ Administrative Burden on Limited Liability Companies and Personally Owned Enterprises
❑ Licensing and Permits Regime
❑ Barriers to Foreign Trade and Investments – based on other OECD databases and indicators
Calculating the PMR indicators
Data collection
Send questionnaire to national authorities
Collect data from other OECD database or indicators where possible
Building the PMR indicators
Data coding
Verify legal sources Check consistency of answers across countries and over time
Cross-check answers with OECD experts
Data verification
Assign numerical values to qualitative information (0 to 6)
Divide quantitative information into classes using thresholds and assign values
Data aggregation
Aggregation of coded data into two sets of indicators:
Validation
Database and indicator scores presented to national authorities
• Economy wide PMR indicator
• Sector PMR indicator
Database and indicators are then published on the OECD PMR webpage
Data collection (2)
Each of the countries surveyed appoints a coordinator, who is responsible for distributing the sections of the questionnaire and collecting the answers
For other countries, especially if included for the first time, a local expert may support the data collection
To facilitate the verification process, the questionnaire asks for legal references and other information to support the answers provided Some information is taken from other OECD indicators and databases and from the UNCTAD Trade Analysis Information System database (for more details see the PMR Methodology Note)
Data verification
An OECD team of experts verifies the answers to ensure that:
❑ questions have been correctly interpreted
❑ answers are consistent across countries
❑ answers are consistent over time {where relevant}
These checks allow the OECD to guarantee the comparability of the indicators
When doubts or uncertainties arise, the OECD team requires the authorities to provide clarifications or further information
Data coding
The qualitative information is turned into numerical values
The values range on a 0 to 6 scale, where a lower value reflects a more competition-friendly answer
Some questions require the respondent to answer by giving a numerical value, in this case, the answers are grouped into classes according to a set of thresholds and 0 to 6 values are applied to these classes
Data coding: an example
0 or 1
Score = 0
2 or 3
Number of public and private bodies to be contacted to start a limited liability company
4 or 5
6 or 7
Score = 1.5
8 or more Competition friendliness
Score = 3
Score = 4.5
Score = 6
Data aggregation: two sets of indicators
1. The Economy-wide PMR indicator organised along a number of horizontal areas
2. A group of sector indicators focused only on individual sectors: – energy, – ecommunications, – transport, – professions, – retail trade, – retail sales of medicines, and – digital markets
PMR economy-wide indicators
Data aggregation the economy-wide indicator
High-level indicators are aggregated in PMR economy-wide indicator using equal weights
Medium-level indicators are aggregated in 2 high level indicators using equal weights
Low-level indicators are aggregated in 6 medium level indicators using equal weights
Coded data is aggregated in 15 low level indicators using weights shown in PMR Schemata
2023 PMR sector indicators
Network
Sectors
- Quality and Scope of Public Ownership
- Regulation
Retail Sector Professional Services
- Entry Regulation
- Conduct Regulation
- Regulation of Physical Shops Sales
- Regulation of Online Sales
Digital Markets
- Assessment of Competition Challenges
- Merger Control
- Energy
- Transport
- Ecomm.
- Lawyers
- Notaries
- Accountants
- Architects
- Civil Engineers
- Estate Agents
- General Retail Distribution
- Retail Sale of Medicines
- Fair Trading for Business Users
- Market Contestability
- Use and Access to Data
Using the PMR indicators
These indicators:
Use of the PMR indicators
❑ enhance the knowledge of regulatory practices in the countries surveyed
❑ permit to identify areas where regulations are not aligned with accepted best practice
❑ allow policymakers to compare policies and learn about other countries’ regulatory frameworks
❑ enable to track regulatory reforms over time (when exercises have been repeated over time)
❑ give the possibility to investigate the link between regulatory reforms and economic performance
Who uses the PMR indicators
and how
1. OECD
❑ Economic Surveys by the Economics Department (ECO)
❑ Policy reports
❑ Competition Assessment Reviews
2. National governments
❑ Assessments and identification of priorities for reforms
3. Other international organizations, such as the European Union and the World Bank
❑ Assessment of the regulatory framework and suggestions for reforms
4. OECD, IMF, academics, and research institutions
❑ Quantification of the impact of pro-competition reforms
Reports on Product Market Regulation in Indonesia and Brazil Examples
