Regulation and growth reloaded: Lessons from 25 years of retail trade and professional services reforms

After decades of weak productivity growth across the OECD, understanding how regulation in market services affects economic performance has become a policy priority. This paper exploits a new OECD dataset covering regulatory policies in retail trade and professional services across 15 OECD countries from 1998 to 2023, greatly extending the time coverage of comparable indicators. These sectors are major employers and important suppliers of intermediate inputs to the rest of the economy: restrictive regulations can hinder competition, technology adoption and resource reallocation. Using a novel regulatory impact (REGIMPACT) indicator that combines services regulatory burden with downstream input-output intensities and a highly demanding identification strategy with extensive fixed effects, we estimate the indirect effects of services regulation on over 20 downstream industries. The results show that deregulation in retail trade and professional services generates positive spillovers to downstream labour productivity, mainly through higher value added, with limited effects on employment and investment. Past reforms delivered modest but meaningful cumulative productivity gains of 1% and 1.5% through deregulation in retail trade and professional services, respectively, with gains concentrated in reforming countries such as Italy, Spain and Belgium, while already deregulated economies saw little change. Looking forward, retail trade and professional services represent a large remaining source of reform-driven productivity gains in the OECD.