Erik Canton, Daria Ciriaci, Irune Solera
Competition in professional services is, in some occasions, hindered by excessive regulation. This may constrain business dynamics (entry and exit of firms) and create inefficiencies and excessive rents. To improve market performance in those professional services generally regulated, several EU countries have reduced regulatory restrictions regarding the entry into and exercise of these professions. This study is an attempt to evaluate the effects of regulatory barriers in four of them, i.e. legal, accounting, architectural and engineering activities in the EU over the period 2008-2011. It is found that less strict regulation improves their allocative efficiency and reduces the observed larger-than-average profitability, through intensified business dynamics.
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