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Product standards, imperfect competition and completion of the market in the European Union


  • Harrison, Glenn
  • Rutherford, Thomas
  • Tarr, David
  • DEC


The authors model the static and steady-state effects on trade, production, and market structure of completion of the European Union's (EU's) internal market. The impetus for change comes from the removal of border costs and the costs of producing to different national standards. It also comes from consumers'greater ability to substitute among the products of producers in different EU countries, once the European Union adopts its program on standards. In the analysis of the static scenario, removing border costs and the costs of supply-side standards improves the welfare of EU countries by only about 0.5 percent of Gross Domestic Product (GDP). Results vary greatly across the countries of the European Union, however, because the benefits to a country are roughly proportional to its share of intra-EU trade in its GDP. This is the first model to identify these countrydifferences because of the greater country disaggregation. The additional effect of the program of standards on consumer demand elasticities increases the competition and reduces markups in imperfectly competitive industries. Then there are additional gains from rationalization, as well as consumer efficiency gains in imperfectly competitive sectors, that result in an increase in the estimated gains to about 1.2 percent of GDP (again with wide differences across EU countries). The steady-state results let the capital stock in each country adjust to its new higher equilibrium value, which acts as an additional endowment of capital, allowing the European Union to produce a higher level of income. The gains to the European Union then rise to about 2.6 percent of GDP.

Suggested Citation

  • Harrison, Glenn & Rutherford, Thomas & Tarr, David & DEC, 1994. "Product standards, imperfect competition and completion of the market in the European Union," Policy Research Working Paper Series 1293, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1293

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    References listed on IDEAS

    1. Kindleberger, Charles P, 1983. "Standards as Public, Collective and Private Goods," Kyklos, Wiley Blackwell, vol. 36(3), pages 377-396.
    2. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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    Cited by:

    1. Maryla Maliszewska, 2004. "EU Enlargement: Benefits of the Single Market Expansion for Current and New Member States," CASE Network Studies and Analyses 0273, CASE-Center for Social and Economic Research.
    2. Erno Zalai, 1998. "Computable Equilibrium Modelling and Application to Economies in Transition," CERT Discussion Papers 9804, Centre for Economic Reform and Transformation, Heriot Watt University.
    3. Anders Hoffmann, 2000. "The gains from partial completion of the single market," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(4), pages 601-630, December.
    4. Nlemfu Mukoko, Jean Blaise & Wabenga Yango, James, 2011. "Zone de libre échange de la sadc et économie de la RDCongo :Création de commerce et Bien-être?
      [Implications of joining the SADC Free Trade Agreement on the D.R.Congo economy]
      ," MPRA Paper 65050, University Library of Munich, Germany, revised Jun 2015.
    5. Helge Sanner, 2006. "Imperfect goods and labor markets, and the union wage gap," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(1), pages 119-136, February.
    6. repec:rnp:ecopol:ep1712 is not listed on IDEAS
    7. World Bank Group, 2016. "Global Economic Prospects, January 2016," World Bank Publications, The World Bank, number 23435, January.
    8. repec:bla:asiaps:v:4:y:2017:i:1:p:50-69 is not listed on IDEAS


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