Unleashing Competition in EU Business Services. CEPS Policy Brief No. 284, 24 September 2012

In most EU member states, the business services industry has booked no productivity growth during the last two decades. The industry’s performance in the other member states was weaker than that of its US counterparts. Exploring what may be causing this productivity stagnation, this policy brief reports that weak competition has contributed to the continuing malaise in European business services. The study analyzed the persistence (over time) of firm-level inefficiencies. The evidence further suggests that competition between small firms and large firms in business services is weak. Markets for business services work best in countries with flexible regulation on employment change and with low regulatory costs for firms that start up or close down a business. Countries that are more open to foreign competition perform better in terms of competitive selection and productivity. The policy simulations in this paper show that greater import openness strengthens competition in business services markets. The largest positive impact comes from lower regulatory barriers for growing and shrinking firms. More particularly, competitive selection would be fostered by a reduction of administrative and regulatory costs related to labour contracts, bankruptcy and start-up requirements. A key element of the European Commission’s Europe-2020 strategy is the Single European Market for Services. Business services form one of the largest industries in Europe – and given its productivity stagnation, it deserves to be a priority target of the Europe-2020 strategy. Improving the way the business services market functions may have large positive knock-on effects for the EU economy.

Regulation of European Banks and Business Models: Towards a new paradigm? CEPS Paperbacks. June 2012

Amidst talks of establishing an EU-wide banking union, the recent changes in the regulatory framework and the rethinking of the future of European banking structure, the future of EU bank regulation is inextricably linked to banks’ business models. Using a sample of over 70 banks, which overlaps with those subjected to the EBA’s 2011 stress tests, this report emphasizes the key regulatory gaps that emerge from a comprehensive analysis of the soundness and performance of bank business models and provides policy-makers with guidance to reinforce the evolving regulatory framework in European banking.

Analysing the Contribution of Business Services to European Economic Growth. Bruges European Economic Research (BEER) Papers 9/February 2007

The sector business services contributes directly and indirectly to aggregate economic growth in Europe. The direct contribution comes from the sector’s own dynamism. Though the business-services industry appears to be characterised by strong cyclical volatility, there was also a strong structural growth. Business services actually generated more than half of total net employment growth in the European Union since the second half of the 1990s. Apart from this direct growth contribution, the sector also contributed in an indirect way to economic growth by generating knowledge and productivity spill-overs for other industries. The knowledge role of business services is reflected in its employment characteristics. The business-services industry created spill-overs in three ways: original innovations, knowledge diffusion, and the reduction of human capital indivisibilities at firm level. The share of knowledge-intensive business services in the intermediate inputs of the total economy has risen sharply in the last decade. Firm-level scale diseconomies with regard to knowledge and skill inputs are reduced by external deliveries of such inputs, thereby exploiting positive external scale economies. The process goes along with an increasingly complex social division of labour between economic sectors. The European business-services industry itself is characterised by a relatively weak productivity growth. Does this contribute to growth stagnation tendencies à la the socalled “Baumol disease”? The paper argues that there is no reason to expect this as long as the productivity and growth spill-overs from business services to other sectors are large enough. Finally, the paper concludes by suggesting several policy elements that could boost the role of business services in European economic growth. This might to achieve some of the ambitious Lisbon goals with respect to employment, productivity and innovation.

Not Making the Lists: The Underrepresentation of Women in EU Politics and Business. EPIN Commentary No. 12, 22 August 2013

The EU has recently been pushing for legislation to strengthen the gender balance on company boards in its member states and indeed, the principle of gender equality is enshrined in the European treaties. Yet, as Vilde Renman points out, women are clearly underrepresented in top positions within EU institutions themselves. The upcoming European Parliament elections are an opportunity for the EU to appoint more women at the highest levels of administration and legislature, thereby setting an example for companies, member states and citizens alike.