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Product market reforms and productivity: a review of the theoretical and empirical literature on the transmission channels

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  • Gaetan Nicodeme
  • Jacques-Bernard Sauner-Leroy

Abstract

Product market reforms are structural reforms of microeconomic type that aim at improving the functioning of product markets by increasing competition amongst producers of goods and services. Theoretical models suggest that regulation and reforms which liberalise or improve the functioning of markets can positively affect productivity through three different channels, namely a reallocation of scarce resources (allocative efficiency), an improvement in the utilisation of the production factors by firms (productive efficiency) and an incentive for firms to innovate to move to the modern technology frontier (dynamic efficiency). This paper reviews the theoretical and empirical literature on these three channels.

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Bibliographic Info

Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 218.

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Length: 29 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:euf:ecopap:0218

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Keywords: product market reforms; competition; productivity; efficiency; Nicodeme; Sauner-Leroy;

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References

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  1. Rachel Griffith & Stephen Redding & John Van Reenen, 2000. "Mapping the two faces of R&D: productivity growth in a panel of OECD industries," IFS Working Papers W00/02, Institute for Fiscal Studies.
  2. Rachel Griffith & Rupert Harisson, 2004. "The link between product market reform and macro-economic performance," European Economy - Economic Papers 209, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. Rachel Griffith & Rupert Harrison & Helen Simpson, 2006. "The link between product market reform, innovation and EU macroeconomic performance," European Economy - Economic Papers 243, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
  5. Stephen Nickell, 1993. "Competition and Corporate Performance," CEP Discussion Papers dp0182, Centre for Economic Performance, LSE.
  6. C. Denis & K. Mc Morrow & W. R�ger & R. Veugelers, 2005. "The Lisbon Strategy and the EU's structural productivity problem," European Economy - Economic Papers 221, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  7. Rachel Griffith & Helen Simpson, 2001. "Characteristics of foreign-owned firms in British manufacturing," IFS Working Papers W01/10, Institute for Fiscal Studies.
  8. Tamim Bayoumi & Douglas Laxton & Paolo Pesenti, 2004. "Benefits and spillovers of greater competition in Europe: a macroeconomic assessment," International Finance Discussion Papers 803, Board of Governors of the Federal Reserve System (U.S.).
  9. Richard E. Caves, 1992. "Industrial Efficiency in Six Nations," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031930, December.
  10. Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000. "Restructuring And Productivity Growth In UK Manufacturing," CEPR Discussion Papers 2463, C.E.P.R. Discussion Papers.
  11. Karl Aiginger, 2003. "A Three Tier Strategy for Successful European Countries in the Nineties," WIFO Working Papers 205, WIFO.
  12. MacDonald, James M, 1994. "Does Import Competition Force Efficient Production?," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 721-27, November.
  13. Meyer, Margaret A & Vickers, John, 1995. "Performance Comparisons and Dynamic Incentives," CEPR Discussion Papers 1107, C.E.P.R. Discussion Papers.
  14. Karl Aiginger & Michael Landesmann, 2002. "Competitive Economic Performance: The European View," WIFO Working Papers 179, WIFO.
  15. André Sapir & Alexis Jacquemin, 1991. "Competition and imports in the European market," ULB Institutional Repository 2013/8220, ULB -- Universite Libre de Bruxelles.
  16. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  17. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  18. Blundell, Richard & Griffith, Rachel & van Reenen, John, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 529-54, July.
  19. Haskel, Jonathan, 1991. "Imperfect Competition, Work Practices and Productivity Growth," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(3), pages 265-79, August.
  20. Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-93, June.
  21. Green, Alison & Mayes, David, 1991. "Technical Inefficiency in Manufacturing Industries," Economic Journal, Royal Economic Society, vol. 101(406), pages 523-38, May.
  22. N Dryden & Stephen Nickell & D Nicolitsas, 1996. "What Makes Firms Perform Well?," CEP Discussion Papers dp0308, Centre for Economic Performance, LSE.
  23. Ravi Jagannathan & Shaker B. Srinivasan, 2000. "Does Product Market Competition Reduce Agency Costs?," NBER Working Papers 7480, National Bureau of Economic Research, Inc.
  24. Andrew Sharpe, 2002. "Productivity Concepts, Trends And Prospects: An Overview," The Review of Economic Performance and Social Progress, in: Andrew Sharpe, Executive Director & France St-Hilaire, Vice-President , Research & Keith Banting, Di (ed.), The Review of Economic Performance and Social Progress 2002: Towards a Social Understanding of Productivity, volume 2 Centre for the Study of Living Standards & The Institutute for Research on Public Policy.
  25. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
  26. Michele Cincera & Olivia Galgau, 2005. "Impact of market entry and exit on EU productivity and growth performance," European Economy - Economic Papers 222, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  27. Jacques-Bernard Sauner-Leroy, 2003. "The impact of the implementation of the Single Market Programme on productive efficiency and on mark-ups in the European Union manufacturing industry," European Economy - Economic Papers 192, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  28. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
  29. Nicola Brandt, 2004. "Business Dynamics, Regulation and Performance," OECD Science, Technology and Industry Working Papers 2004/3, OECD Publishing.
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Citations

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Cited by:
  1. Michele Cincera, 2004. "Impact of market entry and exit on EU productivity and growth performance," ULB Institutional Repository 2013/921, ULB -- Universite Libre de Bruxelles.
  2. Bianka Dettmer, 2012. "The European Union's service directive: Contrasting ex ante estimates with empirical evidence," Jena Economic Research Papers 2012-019, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. Valkonen, Laura, 2006. "Deregulation as a Means to Increase Competition and Productivity," Discussion Papers 1014, The Research Institute of the Finnish Economy.
  4. Theodoros S. Papaspyrou, 2007. "Economic Policy in EMU: Community Framework and National Strategies – focus on Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 04, Hellenic Observatory, LSE.
  5. Theodoros S. Papaspyrou, 2007. "Economic policy in EMU: community framework and national strategies - focus on Greece," LSE Research Online Documents on Economics 5631, London School of Economics and Political Science, LSE Library.
  6. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers 404, WIFO.
  7. Edquist, Harald & Henrekson, Magnus, 2013. "Product Market Reforms and Incentives to Innovate in Sweden," Working Paper Series 986, Research Institute of Industrial Economics.

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