The Gains from More Competitive Regulation Settings in Canada

This article explores potential gains for Canada from making its regulatory framework as competition friendly as that in the United States. We estimate standard cross-country GDP growth regressions incorporating the OECD’s indicators of product market regulations (PMRs) that measure the extent to which regulations, laws and other rules inhibit product market competition. Based on the key point estimate (or the lower bound of its 95 per cent confidence interval), GDP per capita in Canada could be about 2.0 per cent (0.7 per cent) higher in the medium term (i.e. 5 years) and about 5.3 per cent (1.8 per cent) higher after 20 years as a result of making Canada’s 2013 regulatory settings related to foreign direct investment (FDI) as competitive as in the United States. However, government actions taken since 2013 have improved the competitiveness of these regulations. As a result, further changes needed to reach the US benchmark are not as great as they were in 2013 and would not generate as substantial gains. In addition to setting the right framework