Macroeconomic benefits of standardisation
A 2023 report by Menon Economics analyses the benefits of standardisation. It shows that standards are associated with productivity growth and increased exports in the Nordics and the Netherlands, which in turn leads to greater economic output and prosperity, benefiting society as a whole.
Standardisation is associated with about 9% of the overall export growth from 1995 to 2019.
Increased exports generate employment, enhance productivity, and finance imports, fostering more trade. International trade expands the availability of goods and services while lowering prices. Trade is also essential for development and poverty reduction.
Continuing standardisation at the current rate could yield roughly 2 billion euros annually; DKK 2 billion in Denmark / NOK 2.1 billion in Norway / SEK 3.5 billion in Sweden / EUR 132 million in Finland / ISK 1.6 billion in Iceland / EUR 1 billion in the Netherlands.
Standardisation contributed to an increase in labour productivity by 25% from 1970 to 2019, propelling remarkable productivity growth in the Nordics and the Netherlands.
Each employee now generates more than double the output than fifty years ago. A quarter of the growth in labour productivity is associated with standards.
If the pace of standardisation work continues, it is estimated to contribute an annual GDP increase of 2.6 billion euros, or 100 euros per employee; DKK 2.6 billion in Denmark / NOK 4.8 billion in Norway / SEK 6 billion in Sweden / EUR 260 million in Finland / ISK 3.4 billion in Iceland / EUR 885 million in the Netherlands
How standards enhance productivity:
- Standards increase interoperability by simplifying and streamlining interactions between products, systems, and organisations. By establishing a consensus among stakeholders, it eliminates the need for multiple processes, resulting in a unified and efficient value chain.
- Standards improve quality assurance by establishing specific requirements and technical specifications for products, services, and processes. Standards promote best practices, ensure consistent quality, and facilitate validation, thus reducing the need for additional quality controls and minimising the risk of failure.
- Standards increase competition by levelling the playing field. Standards provide affordable access to state-of-the-art technical information. They reduce the variety of intermediate goods, cost-effectively disseminate technical knowledge, and build trust in new entrants.
- Standards increase innovation by providing a common platform for companies and organisations to build upon, reducing the need for reinventing existing knowledge. Developing standards itself also fosters innovation by bringing together experts and encouraging market-driven solutions.
- Standards provide market access and thus drive international trade by enhancing compatibility, reducing transaction costs, and serving as a quality signal.
Standardisation also serves other purposes including health, safety, consumer protection, and environmental protection.
Regulations made with reference to standards are often less rigorous compared to those made without standards. Without reference to standards, the regulators would have to regulate more directly, which often creates more barriers and inefficiencies than referring to standards, which tend to be more closely connected with the industry.
Standards create substantial positive externalities and thus should be encouraged.
As standards create significant benefits for customers beyond what firms are rewarded for, standardisation may be lower than optimal. Thus, governments should support further standardisation, as there are great macroeconomic benefits of standardisation benefitting society as a whole.