By Young-Hyun Shin, Nivetha Sivakumar and Ben Westmore, OECD Economics Department.
Regulatory policy is critical in shaping the incentives and ability for businesses to innovate and expand and supporting workers to move to the parts of the economy where their skills are needed the most. Assessing regulatory policy settings is thus important in identifying the reasons for the slowdown in labour productivity growth (Figure 1) and business dynamism in OECD economies over the past two decades, as discussed in a special chapter in the December OECD Economic Outlook. This is reinforced by new OECD estimates that highlight that the resources devoted to servicing regulatory compliance have been rising in the United States, the euro area and Australia (Andrews, Turban and Tyros, forthcoming).
But what aspects of regulatory policy need to be addressed? Regulatory environments are multi-faceted and reform priorities will vary across economies. Chapter 3 of the recent OECD Economic Outlook contains country-specific regulatory policy reform priorities. These can be aggregated to give a snapshot by reform category (Figure 2) and highlight two broad types of policy priorities: firstly, the need to reassess the existing stock of regulations and make changes to the methods used to design and implement regulations and, secondly, reducing regulatory impediments in particular markets, especially product markets.
There are also some notable differences between the reform recommendations for advanced and emerging-market economies. For instance, lowering regulatory barriers to firm entry in services sectors, as well as measures that reduce the stringency of housing regulations, are most relevant in advanced economies, while lowering regulatory barriers to foreign direct investment are judged to be particularly necessary in emerging markets (Figure 3).
Delving into the identified country-specific reform recommendations in more detail:
- The need for reforms to simplify regulatory processes is widely recommended, including for most OECD countries. Efforts to streamline regulatory processes for business registration are judged to be necessary in many countries, including in Argentina, Brazil, Bulgaria, China, Colombia, Estonia, Hungary, Iceland, Ireland, Israel, Japan, Mexico, Norway, Poland, Peru, Romania, the Slovak Republic and Slovenia. In addition, harmonising regulations across levels of government would simplify the regulatory framework in Australia, Germany, India and Switzerland.
- Institutional arrangements for regulatory design and oversight need to be improved in several countries, including through more rigorous use of evaluations of regulations in the euro area, China, Czechia and Denmark. In China, greater consumer protection is also needed along with better institutional oversight of regulations. Initiatives to improve regulatory enforcement are also recommended in some other emerging-market economies, including Argentina and Thailand.
- Lowering regulatory barriers to product market entry is commonly needed. This is particularly the case in services sectors, such as in France where there are high barriers to entry for architects and accountants and stringent practice controls for lawyers and real estate agents. Reforms that reduce restrictions on entry to professional services would also be beneficial for growth in Austria, Belgium, Brazil, Czechia, Estonia, Ireland, Israel, Luxembourg and the Slovak Republic. There is also scope for rationalising such barriers in network sectors in some countries, including in Canada, Korea, Lithuania and the United States. Regulatory barriers to inward foreign direct investments could also be eased, including in Costa Rica, Iceland, Indonesia, Korea, Thailand and Viet Nam.
- To help facilitate firm exit and improve business dynamism, improved insolvency regulations are recommended for several European economies, including Belgium, Hungary, Iceland, the Netherlands and Romania, as well as in South Africa and Türkiye.
- Reforms to housing regulations are identified as a priority for several advanced economies, such as changes to spatial planning policies in Australia, the United Kingdom and the United States. However, such policies are not identified as a key priority for emerging-market economies.
- Reducing regulatory barriers to trade, such as those arising from strict local content requirements in Brazil, unwarranted technical requirements on imports in Argentina and slow customs procedures in India, are essential to improving productivity growth. Implementing trade facilitation measures is also highlighted as a priority in other economies, including Iceland and Switzerland.
The summary highlights that smarter regulatory policy, such as reforms that simplify existing regulatory procedures and adjust regulatory design systems and enforcement, are the priority for future growth prospects. While reducing regulatory stringency is also relevant, deregulation should not be the sole focus of policymakers. Indeed, the importance of having regulations in place that effectively target market failures and social objectives, such as safety, environmental and equity concerns, should not be overlooked. Reforms should aim for regulations that serve their objectives and are administered in the most efficient way possible. In the context of an uncertain macroeconomic environment, such an approach can promote the resilience and adaptability of economies to future shocks and long-term economic growth.
References
OECD (2025), OECD Economic Outlook, Volume 2025 Issue 2: Resilient Growth but with Increasing Fragilities, OECD Publishing, Paris, https://doi.org/10.1787/9f653ca1-en
Andrews, D., S. Turban and S. Tyros (forthcoming), “Death by a thousand cuts? New evidence on regulatory compliance costs and productivity”, OECD Economics Department Working Papers.