Appendix - Definitions, Sources, and Methods

The measure of labor market regulation gauges the extent of regulations governing the hiring and firing of workers—often termed employment protection legislation. It is a summary measure that ranges from 0 (no restrictions) to 6 (very restrictive). The following factors are considered: the extent of procedural requirements that employers must follow in individual or collective dismissals, notice and severance pay requirements, and the degree of regulation on temporary forms of employment.

The measure of product market regulation is based on a simple average of indicators for seven industries, where each industry is rated from 0 (no restrictions) to 6 (very restrictive). The industries are gas, electricity, postal and courier activities, telecommunications, air transport, railways, and road freight. Depending on the industry, the following factors are considered: barriers to entry, public ownership, market structure, vertical integration, and price controls.

Both indicators are constructed by OECD from a variety of national sources as well as from multi-country surveys. The construction of these summary measures involves difficult choices of quantification and weighting. For further information on these choices, see the source documents.

Source: OECD, Employment and Labour Market Statistics Database and Conway, P., V. Janod and G. Nicoletti, "Product Market Regulation in OECD Countries, 1998 to 2003," OECD Economics Department Working Paper No 419, 2005, http://www.oecd.org/.