Product Market Competition and Economic Performance

Increased competition in product markets, as well as being good for consumers, can also boost productivity and employment, according to the study Product Market Competition and Economic Performance by the OECD. Competition improves productivity through a more efficient use of resources. At the same time it can encourage innovation and the rapid spread of new technology. Reforms to make product markets more dynamic will also boost real wages as prices are lowered through increased competition. The study argues that reforms undertaken between the late 1970s to the late 1990s, such as the liberalisation of telecommunications industries, increased employment rates in OECD countries by an average of 1.5 percentage points, reaching 2.5 percentage points in economies where pro-competition policies were pursued most vigorously. This study forms a chapter in the OECD Economic Outlook No. 72 published in December 2002.