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Does Competition Promote Productivity Gains? An Analysis by Sector in OECD Countries

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Author Info

  • Romain Bouis

    (DGTPE (Ministry of Economy))

  • Caroline Klein

    (DGTPE (Ministry of Economy))

Abstract

This paper analyses to what extent differences in competition intensity (assessed through estimated markups) between economic sectors explain international differences in hourly labour productivity gains at the sector level in a set of OECD countries. Results indicate the presence of a non-linear relationship between competition and labour productivity gains. Increased competition would benefit productivity growth in low-competition sectors, but would be detrimental above a certain level. This negative effect seems however fragile as it is no more significant when the sample is restricted to the most competitive sectors. Besides, in the manufacturing sectors characterized by relatively high competition and sunk costsmore intense competition would slow productivity gains. This result is in line with the European Commission view (Roeger et al., 2008) that margins need to reach a certain level in order to stimulate innovation in these sectors. At the opposite, greater competition in services would consistently promote productivity gains.

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File URL: http://www.insee.fr/fr/ffc/docs_ffc/ES419-420e.pdf
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Bibliographic Info

Article provided by Institut National de la Statistique et des Etudes Economiques in its journal Economie et Statistique.

Volume (Year): 419-420 (2009)
Issue (Month): (August)
Pages: 73-99

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Handle: RePEc:crs:ecosta:es419-420e

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Keywords: Labour productivity; Competition; Cross-country and Sectoral Study;

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