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Product Market Regulation and Productivity Convergence: OECD Evidence and Implications for Canada

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Author Info
Paul Conway
Giuseppe Nicoletti

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Abstract

In this article we investigate the effect of product market regulation on the international diffusion of productivity shocks. The results indicate that regulations that restrict competition slow the process of adjustment through which best practice production techniques diffuse across borders and new technologies are incorporated into the production process. This effect is reflected in cross-country differences in ICT investment and speeds of catch up of sectoral productivity, which are significantly influenced by differences in product market regulation. Thus, persisting cross-country differences in product market regulation can partially explain the recent observed divergence of labour productivity in OECD countries, given the emergence of new general purpose technologies over the 1990s. In the case of Canada, the results suggest that remaining regulatory barriers to competition in a few key non-manufacturing sectors may have prevented the economy from benefiting to the full extent from high productivity growth rates in the United States and other productivity leaders.

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Publisher Info
Article provided by Centre for the Study of Living Standards in its journal International Productivity Monitor.

Volume (Year): 15 (2007)
Issue (Month): (Fall)
Pages: 3-24
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Handle: RePEc:sls:ipmsls:v:15:y:2007:1

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Related research
Keywords: product market regulation; OECD countries; cross-country differences; sectoral productivity; reform.;

Find related papers by JEL classification:
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
O20 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - General
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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    Other versions:
  2. Jean-Philippe Cotis, 2006. "Benchmarking Canada's Economic Performance," International Productivity Monitor, Centre for the Study of Living Standards, vol. 13, pages 3-20, Fall. [Downloadable!]
  3. Paul Conway & Giuseppe Nicoletti, 2006. "Product Market Regulation in the Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights," OECD Economics Department Working Papers 530, OECD, Economics Department. [Downloadable!]
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    Other versions:
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    Other versions:
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  9. Gust, Christopher & Marquez, Jaime, 2004. "International comparisons of productivity growth: the role of information technology and regulatory practices," Labour Economics, Elsevier, vol. 11(1), pages 33-58, February. [Downloadable!] (restricted)
  10. Dominique Guellec & Bruno van Pottelsberghe de la Potterie, 2001. "R&D and Productivity Growth: Panel Data Analysis of 16 OECD Countries," OECD Science, Technology and Industry Working Papers 2001/3, OECD, Directorate for Science, Technology and Industry. [Downloadable!]
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    Other versions:
  14. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, 06. [Downloadable!] (restricted)
    Other versions:
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