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The following OECD assessment and recommendations summarise Chapter 4 of the Economic Survey of the Netherlands 2005 published on 15 December 2005.
How could competition in product markets be increased to boost productivity growth?
Even though the level of Dutch productivity is high, its growth has trended down. This differs from the evolution in some other countries, such as the United States and the United Kingdom, where productivity growth has accelerated since the mid 1990s. Sluggish productivity growth is often associated with a lack of product market competition, as firms protected from competitive pressures have less incentive to increase their efficiency. According to the product market regulation (PMR) indicator, the Netherlands occupies an intermediate position. However, it has relatively high barriers to entrepreneurship, reflecting complex, time consuming and expensive procedures to obtain licences and permits. Moreover, personal costs of bankruptcy are high, which is likely to discourage entry and growth of firms. Against this backdrop, the authorities have embarked on a medium term plan aimed at alleviating the burden of regulation. They are right to envisage reducing the personal costs of bankruptcy by offering the bankrupt individual a “clean slate” by way of discharge. They also rightly plan a simplification of the licence and permits system by introducing a “silence is consent” rule.
With respect to corporate governance, the government has decided to increase the power of shareholders. The practice of co optation (in which existing members of the supervisory board select the new members) was abolished along with non-voting shares with the introduction of the new structural regime. Co-optation and certification (trust offices that are on friendly terms with the management hold the shares and issue non voting certificates) in the past have discouraged hostile takeovers.
In countries where productivity has accelerated in recent years, most of the increase has taken place in two key ICT-using service sectors distribution and financial services. In the Netherlands, the development of large retail stores with a high use of ICT has been hindered by strict zoning regulations and regulation of shop opening hours, inhibiting the exploitation of economies of scale. The liberalisation of shop opening hours is to be evaluated next year. Municipalities have a large influence on the location of (large) outlets due to their responsibility in drawing up zoning plans but have weak incentives to authorise the establishment of such outlets and might be inclined to favour insiders. In the financial sector, the main barrier to greater use of ICT to raise productivity growth is the lack of integration of retail banking across Europe.
Productivity growth in the Netherlands has been among the lowest in the OECD,
especially in services.
Decomposition of trend labour productivity growth per person (1)
1. Countries are ranked by descending order according to the performance in 1996 2002. Finland was the second best OECD performer (Sweden was the best performer in 1996 2002 but does not provide data for 1990 95). Spain is the worst OECD performer.
Source: OECD STAN Database.
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Return to the Economic Survey of the Netherlands 2005
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For further information please contact the Netherlands Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by David Carey, Ekkehard Ernst, Jelte Theisens and Rebecca Oyomopito under the supervision of Patrick Lenain.
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