Economic surveys and country surveillance

Economic Survey of Luxembourg 2006: Increasing product market competition to boost productivity

 

Contents | Executive Summary | How to obtain this publication |  Additional Information

The following OECD assessment and recommendations summarise Chapter 5 of the Economic Survey of Luxembourg 2006 published on 5 July 2006.

Contents                                                                                                                           

Currently, any form of inter-professional cooperation for lawyers is forbidden in Luxembourg, while restrictive regulation on inter-professional cooperation and on the form of business may hinder the development of new services or cost-efficient business models. More specifically, this inhibits the creation of integrated legal and accountancy advice for tax issues and prevents the creation of one-stop shops for professional services. Moreover, lawyers are subject to the restriction of having only one address, which prohibits the opening of branches, franchises or chains. Liberalisation from these restrictions could lead to a reduction in costs and lower prices for the clients, thanks to economies of scale. Moreover, architectural and engineering professions, which are less subject to the need to protect the practitioner’s independence than is the case for lawyers, function effectively without regulations on the form of business in most EU member states. Hence, those restrictions which do not seem essential to protect consumers should be dropped.

Cross-country evidence has shown that liberalisation policies and regulatory reform that introduced competition in network industries over the 1980s and 1990s have led to higher productivity, better quality and, often, lower prices (OECD, 2001). The effectiveness of the currently applied network policies to foster competition is a function of the independence of the sector regulators and conditions for network access. The independence of the Luxembourg sector regulator is relatively high on a cross-country comparison according to the Competition Law and Policy Indicator, which measures independence by means of the institutional design and the regulator’s accountability and powers. On the other hand, network access has been complicated by a high degree of vertical integration and to some extent entry restrictions.

In recent years, the lack of competition in broadband internet access, due to a high degree of vertical integration of the incumbent telecommunications company and a lack of sufficient powers of the ILR, has been clearly identified and well documented. The situation has recently improved. The penetration of broadband internet access is now around the OECD average, even though it remains relatively low when compared with other high income countries. One of the major problems was the high connection prices to the local loop being charged by the incumbent. Although these prices were lowered in early-2005, monthly prices of full unbundled loop and shared access remain higher than in neighbouring countries, as reflected in the high broadband price per Megabit. Moreover, bit stream access remained extremely restrained, due to a lack of investment in adequate equipment. Reflecting these remaining hurdles, the incumbent company continues to hold a dominant market share of around 75% of fixed broadband retail lines. Finally, competition in the cable operator market may be hampered by the fact that the incumbent telecommunications company owns equity in one cable company established in Luxembourg.

Summary indicator of regulation of professional services(1)

1. Sorted by 2003 values. The scale of indicators is 0-6 from least to more restrictive. The professional services covered are: architects, engineers, accounting, legal.
Source: Conway, P. and Nicoletti, G (2006),'The OECD Indicators of Product Market Regulation', OECD Economics Department Working Papers, forthcoming.

How to obtain this publication                                                                                      

The Policy Brief (pdf format) can be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.

The complete edition of the Economic Survey of the Luxembourg 2006 is available from:

 

Additional information                                                                                                  

For further information please contact the Luxembourg Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by David Carey, Ekkehard Ernst and Stefaan Ide under the supervision of Patrick Lenain.

 

 

 

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