Liberalizing markets by reducing trade, investment and competition barriers to “best practice” levels could significantly raise gross domestic product per capita in the European Union and the United States, according to a new study from the Organization for Economic Co-operation and Development.

The paper estimates that reducing such barriers could increase per capita GDP over the medium term by 2%-3.5% in the EU, 1.5%-3% in the OECD area as a whole (including an estimated 2% in Canada), 1% to 3% in the U.S. and 0.5% to 1.5% in the OECD area outside the U.S. and EU.

The need to ease competition restrictions is greater in the EU than in the U.S.. Consequently, the economic benefits of reform would be greater in Europe, the paper adds.

These higher levels of GDP, once in place, would have a cumulative effect on earnings, it suggests. The study estimates that the benefit to workers in OECD countries could amount to the equivalent of a full year’s income across a working lifetime.

The study establishes benchmarks of best practice against which other OECD countries can be measured. Canada has the clearest business regulations, it says. Australia has the least restrictive level of state control of business. Denmark and Ireland impose the lightest administrative procedures for start-ups. And, Ireland, alongside the UK, scores well in openness to competition.

Matching the best practice benchmarks across a range of competition and trade regulations would require major reform efforts in all OECD countries, it notes. In most EU countries competition-restraining regulations need to be reformed in particular in the domestic air, rail and road transport and in the gas and electricity sectors. The U.S., too, needs to concentrate reform on its electricity and rail transport sectors.

The paper argues that reforming regulations restraining competition, especially in services, would contribute more to raising GDP than reducing barriers to trade and foreign direct investment.

Commenting on the study, OECD secretary-general Donald Johnston said, “I welcome this invaluable and timely contribution to the growing body of evidence which shows that more open product markets create higher productivity. Here, as in other areas of the Organisation’s work, OECD analysis has a key role to play not just in undertaking research on closer economic integration, but also in providing concrete, policy-focused results.”