Table Of ContentPeter Zweifel (Ed.)
Services
Switzerland
in
Structure, Performance,
and Implications
of European Economic Integration
With 41 Figures and 57 Tables
Springer-Verlag
Berlin Heidelberg New York
London Paris Tokyo
Hong Kong Barcelona
Budapest
Professor Dr. Peter Zweifel
Institute for Empirical Research in Economics
University of Zurich
Bliimlisaipstr. 10
CH-8006 Zurich, Switzerland
ISBN-13:978-3-540-57286-2 e-ISBN-13:978-3-642-78552-8
DOl: 10.1007/978-3-642-78552-8
This work is subject to copyright. All rights are reserved, whether the whole or part of the
material is concerned, specifically the rights oftransiation, reprinting, reuse ofi llustrations,
recitation, broadcasting, reproduction on microfilms or in other ways, and storage in data
banks. Duplication ofthis publication or parts thereofis only permitted under the provisi
ons ofthe German Copyright Law ofS eptember 9,1965, in its version ofJune 24,1985, and a
copyright fee must always be paid. Violations fall under the prosecution act of the German
Copyright Law.
© Springer-Verlag Berlin· Heidelberg 1993
The use ofr egistered names, trademarks, etc. in this publication does not imply, even in the
absence of a specific statement, that such names are exempt from the relevant protec
tive laws and regulations and therefore free for general use.
4217130-543210 -Printed on acid-free paper
Table of contents
Foreword IX
List of tables XI
List of figures XIII
O. Overview and synthesis 1
0.0. Theoretical considerations 2
0.1. Regulatory framework 8
0.2. Structure and development of the service sector in Switzerland 19
0.3. Future changes induced by European economic integration 38
0.4. Outlook 47
0.5. References 56
A. Theoretical appendix to chapter 0 59
A.O. The new theory of demand as the frame of reference 60
A.1. Application to construction 67
A.2. Application to telecommunications 68
A.3. Application to road transport 69
A.4. Application to retail trade 70
A.5. Application to banking 72
A.6. Application to insurance 73
A.7. Application to tourism 75
A.8. Application to management consultancy 76
A.9. References to theoretical appendix 78
1. Construction 79
1.1. The regulatory framework since 1980 80
1.2. Structural development of the Swiss construction sector 84
1.3. The technical efficiency of Swiss construction firms 91
1.4. Conclusion 94
1.5. References 96
1.6. Appendix to chapter 1: The data envelopment analysis (DEA) approach
to technical efficiency 99
VI Table of contents
2. Telecommunications services 103
2.1. The regulatory framework since 1980 104
2.2. Structural development of the Swiss telecommunications industry 108
2.3. Future changes induced by participation in European economic integration 114
2.4. Outlook 118
2.5. References 120
3 Road transport 121
3.0. Introductory remarks 122
3.1. The regulatory framework for road transport since 1980 125
3.2. Structure and development of the road transport sector in Switzerland 130
3.3. Future changes induced by participation in European economic integration 135
3.4. Outlook 139
3.5. References 142
4. Retail trade 145
4.0. Introductory remarks 146
4.1. The legislative framework relevant to retail trade 147
4.2. Structure and development of Swiss retail trade 149
4.3. Future changes induced by participation in European economic integration 155
4.4. Internationalization 159
4.5. Concluding remarks 160
4.6. References 161
5. Banking 163
5.0. Introduction 164
5.1. The regulatory framework since 1980 165
5.2. Structure, development, and performance of the Swiss banking industry 166
5.3. Future changes induced by European economic integration 175
5.4. Concluding remarks 181
5.5. References 182
6. Insurance 183
6.1. The regulatory framework since 1980 184
6.2. Structure and development of the Swiss insurance industry 187
6.3. Future changes induced by participation in European economic integration 203
6.4. Outlook 206
6.5. References 208
Table or contents VII
7. Tourism 211
7.0. Introductory remarks 212
7.1. The regulatory framework since 1980 213
7.2. Structure and development of tourism -related services 216
7.3. Future changes induced by participation in European economic integration 224
7.4. Outlook 228
7.5. References 231
8. Management and engineering consultancy 233
8.0. Introductory remarks 234
8.1. The regulatory framework since 1980 in Switzerland 235
8.2. Structure and development of the Swiss management and engineering
consultancy industries 237
8.3. Future changes induced by participation in European economic integration 245
8.4. Outlook 248
8.5. References 249
9. Epilogue: Implications for Swiss foreign economic policy 251
9.1 Switzerland as a services economy 252
9.2 Increasing importance of services for economic development and trade 253
9.3 Difficulties of liberalizing trade in services 254
9.4 Emerging patterns in international trade negotiations 255
9.5 Services and Swiss foreign economic policy 257
Appendix: List of indicators 259
List of contributors 275
Foreword
by RolfM. Jeker, Federal Office for Foreign Economic Affairs
Services have only quite recently become an important issue in foreign economic policy and
particularly in international trade negotiations. Trade policy was traditionally perceived to deal
almost exclusively with exports and imports of goods. The increasing importance of services both
nationally and internationally is, mainly, due to the gains in agricultural and industrial productiv
ity (freeing resources for services activities), and the progress in communication technology,
facilitating trade in invisibles. Notable examples of contractual and legal frameworks for services
in international trade relations are the internal market program of the European Community
extended by the Agreement on the European Economic Are.a (EEA) to EFTA countries, the multi
lateral Uruguay-Round negotiations under the auspices of the GATT on a General Agreement on
Trade in Services (GATS), and the North American Free Trade Agreement (NAFTA) signed by
the United States, Canada and Mexico.
This trend is of particular significance to Switzerland, a country where services contribute about
65% to the value added of the economy, a share which will probably still increase somewhat. Ser
vices also contribute to an important extent to the traditional surplus in the current account of the
Swiss balance of payments. Switzerland clearly has comparative advantages in the field of ser
vices, as is well demonstrated by its long and successful tradition in key services sectors like
banking, insurance, tourism, consulting and engineering. To preserve such advantages, it is of cru
cial importance on one hand to closely watch economic and technological developments and reg
ulatory innovations, while on the other hand to adjust the legal framework at home and to adapt
the international trade system together with our trading partners, whenever needed.
Swiss foreign economic policy dealing increasingly with services, the Federal Office for For
eign Economic Affairs designed a research program to examine the structure, performance and
outlook of services industries, in order to improve the scientific basis for its future work. Parallel
ing a research effort of the EC, the EFTA countries decided to examine in ajoint effort the impact
of "1992" on their services sectors. Combining the two objectives the Federal Office for Foreign
Economic Affairs commissioned a research project to a group of independent experts, coordi
nated by Professor Peter Zweifel. Professor Zweifel succeeded in forming an outstanding team of
scientists with experience in various services industries as well as in Swiss economic policy. The
responsibility for the results lies entirely with the authors. Given an apparent lack of research in
services, the present study is a pioneering effort providing many insights. We hope the results will
serve as a basis for further, more detailed research on the subject matter and be of practical use to
business and government for formulating policies in their respective areas.
Rolf M. Jeker,
Delegate of the Federal Council for Trade Agreements
List of tables
Table 0.1: Services defined as a class of production processes 3
Table 0.2: Relatedness to service and intrinsic limitations of tradeability 5
Table 0.3: Regulation of market access, Switzerland (1992) 8
Table 0.4: Regulation of access to factor markets, Switzerland (1992) 9
Table 0.5: Swiss foreign labor policy 10
Table 0.6: Regulation of product development, Switzerland (1992) 12
Table 0.7: Regulation of pricing, Switzerland (1992) 13
Table 0.8: Taxation of services, Switzerland (1992) 14
Table 0.9: Regulation of use of profits, Switzerland (1992) 14
Table 0.10: Summary of public regulation of services, Switzerland (1992) 16
Table 0.11: Government intervention in Swiss service industries 17
Table 0.12: Present structure of Swiss service industries 20
Table 0.13: Shares of firms exhibiting increasing (IRS), constant (CRS), and
decreasing returns to scale (DRS), in percent 23
Table 0.14: Changes in market structure, Swiss service industries, 1980 -1992 25
=
Table 0.15: Growth of average labor productivity in selected services, 1980 1.00 27
Table 0.16: Trends in concentration, Swiss service industries (1980 -1992) 28
Table 0.17: Changes in determinants of market structure,
Swiss service industries (1980 -1992) 29
Table 0.18: Degree of internationalization of Swiss service industries 32
Table 0.19: Tradeability and comparative advantage 35
Table 0.20: Required regulatory adjustments in six scenarios 37
Table 0.21: Induced structural adjustments in six scenarios 45
Table 0.22: Incremental real GDP and real GDP per worker (1992-2000) 48
Table 0.23: Short-run and long-run assessments 54
Table 1.1: Indicators of market structure 87
Table 1.2: Indicators of market structure, changes 1980 -1991 89
Table 1.3: Indicators of internationalization 89
Table 1.4: Number of firms included in the sample 92
Table 2.1: Regulatory framework 198011992 106
Table 2.2: Employment of the Swiss telecommunications services providers 109
Table 2.3: Product innovations from 1980 to 1992 110
Table 2.4: Prices of Swiss PTTs and IDT corporation compared 112
Table 2.5: Implementation of EC Directives 117
Table 3.1: Modal split of freight transport demand in Switzerland, in % and bn. tkm 123
Table 3.2: Transit freight traffic between Northern Europe and Italy, in mn. tons (1988) 124
Table 3.3: Regulation of road transport in Switzerland and future adjustments 137
XII List of tables
Table 4.1: Retail sales and private consumption, in bn. Sfr. 146
Table 4.2: Delimitation of retail trade 147
Table 4.3: Share of sales of four leading retailing ftrms, in % (1980 -1992) 151
Table 4.4: European retail alliances (1990) 153
Table 4.5: Demographic and economic factors influencing Swiss retail trade,
according to scenario 156
Table 4.6: Regulations of importance to retail trade, according to scenario 157
Table 4.7: Comparison of scenarios for Swiss retail trade 159
Table 5.1: Balance sheets, all banks and ftnance companies, in bn. Sfr. (1980 -1991) 167
Table 5.1: Balance sheets, all banks and ftnance companies, in bn. Sfr. (continued) 168
Table 5.2: Size distribution of banks in Switzerland (1991) 170
Table 5.3: Performance of banking systems (1980 -1990) 171
Table 6.1: Number of companies exhibiting increasing (IRS), constant (CRS) or
decreasing (DRS) returns to scale: Life insurance 192
Table 6.2: Number of companies exhibiting increasing (IRS), constant (CRS) or
decreasing (DRS) returns to scale: Nonlife insurance 193
Table 6.3: Number of companies exhibiting increasing (IRS), constant (CRS) or
decreasing (DRS) returns to scale: Reinsurance 193
Table 7.1: Components of tourism (core part) 212
Table 7.2: Swiss foreign labor policy 215
Table 7.3: European tour operators with more than 1 mn. clients (1988) 218
Table 7.4: Shares of hotels exhibiting increasing (IRS), constant (CRS), and
decreasing returns to scale (DRS), in percent (1990) 221
Table 7.5: Prices of hotel services in several Alpine countries in Sfr. (1980) 223
Table 8.1: Activities in management and engineering consultancy 234
Table 8.2: Management consultancy in the EC and Switzerland (1989) 238
Table 8.3: Employment and supporting staff in the EC and Switzerland (1989) 239
Table 8.4: Turnover of management consultancies in the EC and Switzerland (1989) 240
List of figures
Figure A.I: Cars as differentiated goods 61
Figure A.2: Restoral of product characteristics by a repair service 63
Figure A.3: Trade in repair services. no identity preservation requirement 65
Figure A.4: Trade in repair services. with identity preservation requirement 67
Figure A.5: Relevant product characteristics in construction 68
Figure A.6: Relevant product characteristics in telecommunications 69
Figure A.7: Relevant product characteristics in road transport 70
Figure A.8: Relevant product characteristics in retail trade 71
Figure A.9: Relevant product characteristics in banking 72
Figure A.I 0: Relevant product characteristics in insurance 74
Figure A.II: Relevant personal characteristics in tourism 75
Figure A.12: Relevant personal characteristics in management consultancy 77
Figure 1.1: Total sales in overall and general construction. in bn. Sfr., 85
Figure 1.2: Average employment per firm 86
Figure 1.3: Sales and employment shares of the first four and first eight firms 86
Figure 1.4: Exports and imports 90
Figure 1.5: Overall technical efficiency 93
Figure 1.6: Overall technical efficiency (OTE) and firm size.
general construction (1990) 93
Figure I.A: Measures of efficiency 100
Figure 2.1: Cross-subsidies within the Swiss PITs. mn. Sfr. (1991) III
Figure 2.2: Closed user groups 116
Figure 3.1: Annual tax on lorries weighing 4Ot. in Sfr. (1992) 128
Figure 3.2: Fiscal charges levied on Diesel fuel. Sfr/litre (1992) 129
Figure 4.1: Prices of discounters and multiple-chain stores in Germany and
Switzerland 150
Figure 6.1: Life. nonlife. and reinsurance premiums as part of total premiums
generated in Switzerland. in mn. Sfr. and % 188
Figure 6.2: Life. nonlife. and reinsurance employment as part of total
employment in Switzerland 189
Figure 6.3: Number of insurance companies in Switzerland 195
Figure 6.4: Gross premiums generated in Switzerland. in mn. Sfr. 195
Figure 6.5: Gross premiums worldwide. in mn. Sfr. 196
Figure 6.6: Employment in Swiss insurance (E) 196
