**Figure 7. Product market regulation in Romania and comparator countries**

<!-- Start of picture text --> 3 3<br>2.5 2.5<br>Avg. of all countries = 1.90<br>2 1.65 1.69 2<br>1.5 1.29 1.33 1.34 1.41 1.48 1.565% 5% 4% 1.5<br>1 1.1311% 14%30% 6%42% 9%40% 10%43% 12%39% 43% 33% 41% 1<br>38%<br>0.5 51% 56% 51% 52% 47% 49% 53% 62% 55% 0.5<br>0 0<br>Top 5 -PMR Slovak Hungary EU-15 Czech OECD Romania Poland Romania<br>Republic average Republic average sim. 2017<br>2013<br>State control (SC) Barriers to entry and rivalry (BER) Barriers to trade and investment (BTI)<br><!-- End of picture text --> _Source:_ Pop and Ore Monago 2020.

_Note:_ The top five performers in the overall PMR indicator are the Netherlands, United Kingdom, Austria, Denmark, and New Zealand. Figure shows 2013 information, unless otherwise indicated. PMR = product market regulation .

**Barriers to entry and rivalry still affect some service sectors.** In fact, there are examples of regulations that hamper competition in retail trade, which concentrates a substantial proportion of high-markup firms in the Romanian economy, as seen previously. Drawing from the OECDWBG PMR data set, Pop and Ore Monago (2020) show that although regulations in the retail trade sector are less restrictive than in the EU-15 and OECD, there is still room for improvement to make the retail trade market more efficient. The authors show that licenses and permit requirements may still be imposing an unnecessary burden on entry and increasing the costs to compete in the sector. Companies operating in retail sectors in Romania are subject to requirements that go beyond the general conditions, formalities, and procedures applicable to any company. For instance, in Romania’s clothing industry, licenses and permits are always required, compared with 57 percent of OECD countries and 60 percent of EU-15 countries, which do not have such a requirement.<sup>26</sup> In addition, Romania has regulations that impose restrictions on entry or expansion of business activities and constrain strategic options to compete in retail markets. For instance, most of the PMR countries and all top five performers do not restrict firms from selling below cost (beyond a prohibition of predatory pricing), and restrictions on sales promotions are not a common practice either.<sup>27</sup> In Romania, sales below cost are prohibited or restricted beyond a prohibition of predatory pricing. Likewise, sales promotions are restricted to a particular time of the year.<sup>28</sup>

4.3. DO FIRM MARKUPS DIFFER ACROSS FIRMS WITH DIFFERENT ATTRIBUTES?

**To answer this question, the analysis explores how markup performance differs across different types of firms.** To assess the heterogeneity in markups, the analysis relates markups to firm-level characteristics, such as size, age, ownership status, R&D status, and location,

> 26 In this case, the least restrictive countries, such as Bulgaria, Latvia, and Sweden, do not have such requirements. 27 Among the Central and Eastern Europe comparator countries, only the Czech Republic and the Slovak Republic apply restrictions on discounted sales pricing, while only Poland applies constraints to sales promotions.

> 28 Government Ordinance no. 99/2000 prohibits sales below costs and provides for the conditions and periods when certain types of promotions can take occur.

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