This chapter introduces the first part of the book, which examines the question: do product market reforms contribute to Europe's poor growth and productivity record? The key finding is that although reforms are difficult to implement and do not always deliver the expected gains, particularly in the short term, deregulation of services in all three countries analysed is found to be associated with faster productivity growth and competitiveness both in the service sector and in the rest of the economy. This latter result is largely due to the fact that services play a much more pervasive role in the overall economy than generally acknowledged as they have a significant input into non-service activities like manufacturing and agriculture. Consequently, changes in efficiency, quality, and costs of services delivered trickle down to large competitive gains in the overall economy. The bottom line is that liberalization in services has the potential to bring large welfare gains and governments need to persevere in their effort to reform the service sector.
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