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.

Competition in tree row agroforestry systems. 3. Soil water distribution and dynamics

The purpose of this study was to test the hypothesis that soil water content would vary spatially with distance from a tree row and that the effect would differ according to tree species. A field study was conducted on a kaolinitic Oxisol in the sub-humid highlands of western Kenya to compare soil water distribution and dynamics in a maize monoculture with that under maize (Zea mays L.) intercropped with a 3-year-old tree row of Grevillea robusta A. Cunn. Ex R. Br. (grevillea) and hedgerow of Senna spectabilis DC. (senna). Soil water content was measured at weekly intervals during one cropping season using a neutron probe. Measurements were made from 20 cm to a depth of 225 cm at distances of 75, 150, 300 and 525 cm from the tree rows. The amount of water stored was greater under the sole maize crop than the agroforestry systems, especially the grevillea-maize system. Stored soil water in the grevillea-maize system increased with increasing distance from the tree row but in the senna-maize system, it decreased between 75 and 300 cm from the hedgerow. Soil water content increased least and more slowly early in the season in the grevillea-maize system, and drying was also evident as the frequency of rain declined. Soil water content at the end of the cropping season was similar to that at the start of the season in the grevillea-maize system, but about 50 and 80 mm greater in the senna-maize and sole maize systems, respectively. The seasonal water balance showed there was 140 mm, of drainage from the sole maize system. A similar amount was lost from the agroforestry systems (about 160 mm in the grevillea-maize system and 145 mm in the senna-maize system) through drainage or tree uptake. The possible benefits of reduced soil evaporation and crop transpiration close to a tree row were not evident in the grevillea-maize system, but appeared to greatly compensate for water uptake losses in the senna-maize system. Grevillea, managed as a tree row, reduced stored soil water to a greater extent than senna, managed as a hedgerow.