The authors wish to thank Philippe Aghion for advice at the preparatory stage of this paper and Francesco Daveri for useful comments as well as participants in the OECD-CESifo conference on “Product market regulation: political economy and effects on performance”, Munich 29-30 January 2010, and in seminars at the OECD and Banque de France. The views expressed in the paper are those of the authors and do not necessarily reflect those of Banque de France, the OECD, its member countries, or the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications