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Competition, technological change and productivity gains: a European sectoral analysis

Author

Listed:
  • Stéphane Ciriani

    (Orange France)

  • François Jeanjean

    (Orange France)

Abstract

We show that the relationship between the level of competition (the price markup) and the growth of labor productivity in 28 sectors of a panel of 8 euro area countries between 1995 and 2018 is consistent with an inverted U-shaped curve. We calculate an optimal price markup that maximizes productivity growth in each sector and show that sectors with the highest rates of technical progress are the ones that maximize their growth of productivity at the lowest levels of competition (the higher price markup). For the European panel of sectors, during this period, the average loss in productivity growth attributable to deviations from their optimal levels of competition was 0.31%. From a policy perspective, public authorities should aim to enable optimal price markups, particularly in high-innovation sectors, to reap the most benefits from their potential for productivity.

Suggested Citation

  • Stéphane Ciriani & François Jeanjean, 2022. "Competition, technological change and productivity gains: a European sectoral analysis," Economics Bulletin, AccessEcon, vol. 42(2), pages 927-946.
    • Handle: RePEc:ebl:ecbull:eb-21-00711
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    References listed on IDEAS

    as
    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    2. Houngbonon, Georges Vivien & Jeanjean, François, 2016. "What level of competition intensity maximises investment in the wireless industry?," Telecommunications Policy, Elsevier, vol. 40(8), pages 774-790.
    3. Stéphane Ciriani & François Jeanjean, 2020. "Competition, Technological Change and Productivity Gains: A Sectoral Analysis," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(3), pages 192-198, May.
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    5. François Jeanjean, 2021. "Impact of Technical Progress on the Relationship Between Competition and Investment," Journal of Industry, Competition and Trade, Springer, vol. 21(1), pages 81-101, March.
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    9. Stephane Ciriani & Marc Lebourges, 2016. "The role of market power in economic growth: an analysis of the differences between EU and US competition policy theory, practice and outcomes," European Journal of Government and Economics, Europa Grande, vol. 5(1), pages 5-28, June.
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    More about this item

    Keywords

    technical Progress; productivity growth; markup;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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