Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/308867 
more recent Version: 
Year of Publication: 
2025
Series/Report no.: 
GLO Discussion Paper No. 1554
Publisher: 
Global Labor Organization (GLO), Essen
Abstract: 
Conventional wisdom suggests that when business regulation is excessive, deregulation should enhance efficiency. The liberalization of services markets in Croatia demonstrates that this is not necessarily the case, particularly when features of the reform process allow undue influence by those who stand to lose from the removal of regulatory barriers. To assess the effects of the Croatian reform, we determine the yearly volume of deregulation measures applicable to each affected sector and construct a sector-level panel dataset encompassing a wide range of outcomes. Exploiting within-sector, over-time variation in the volume of deregulation measures, we find that deregulation, on average, increased labor productivity but had no effect on entry, employment, or profit margins. While both new entrants and incumbents shared the labor-productivity gains, incumbents benefited more and also experienced an increase in profit margins. Heterogeneity analysis reveals that the reform was more effective in sectors with initial conditions indicative of weaker incumbent power. Our findings underscore the relevance of public-choice perspectives not only in understanding regulation, as emphasized by prior literature, but also in the context of deregulation.
Subjects: 
deregulation
liberalization
services markets
heterogeneity
special interests
JEL: 
L51
L80
D02
K20
P16
Document Type: 
Working Paper

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