The regulation of entry and aggregate productivity
AbstractThe aim of this paper is to contribute to explaining differences in aggregate productivity between similar, industrialized countries such as the US and European Union (EU) member states. By introducing shifts in administrative entry cost and a firm technology adoption decision in a model of heterogeneous firms close to Hopenhayn (1992), it matches the following facts: higher entry cost is associated with (1) both lower labor and total factor productivity, (2) more capital-intensive production, and (3) lower firm turnover. Compared to previous studies of reallocation intensity and aggregate productivity, endogenizing capital intensity through technology choice leads to stronger results; higher equilibrium capital intensity acts as an entry barrier to new firms, and protects low-productivity incumbents. Notably, the very small differences in the administrative cost of entry as documented by Djankov, La Porta, Lopez-de-Silanes and Shleifer (2002) suffice to explain 10 to 20% of differences in TFP and the capital-output ratio between Europe and the US. To obtain this, both heterogeneity of firms and allowing for technology choice are crucial.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2006/21.
Date of creation: 2006
Date of revision:
Contact details of provider:
Postal: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy
Web page: http://www.eui.eu/ECO/
More information through EDIRC
growth theory; aggregate productivity; technology adoption; firm dynamics; entry and exit; reallocation; selection; regulation of entry;
Other versions of this item:
- Markus Poschke, 2010. "The Regulation of Entry and Aggregate Productivity," Economic Journal, Royal Economic Society, vol. 120(549), pages 1175-1200, December.
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-11 (All new papers)
- NEP-COM-2006-09-11 (Industrial Competition)
- NEP-EFF-2006-09-11 (Efficiency & Productivity)
- NEP-ENT-2006-09-11 (Entrepreneurship)
- NEP-MAC-2006-09-11 (Macroeconomics)
- NEP-REG-2006-09-11 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E. With contributions by-Name:Dunne,Tim With contributions by-Name:Haltiwanger,John, 1995.
"The Dynamics of Industrial Competition,"
Cambridge University Press, number 9780521465618, October.
- Stefano Scarpetta & Philip Hemmings & Thierry Tressel & Jaejoon Woo, 2002. "The Role of Policy and Institutions for Productivity and Firm Dynamics: Evidence from Micro and Industry Data," OECD Economics Department Working Papers 329, OECD Publishing.
- Richard Blundell & Steve Bond, 1999.
"GMM estimation with persistent panel data: an application to production functions,"
IFS Working Papers
W99/04, Institute for Fiscal Studies.
- Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor and Francis Journals, vol. 19(3), pages 321-340.
- Lucia Foster & John Haltiwanger & C.J. Krizan, 1998.
"Aggregate Productivity Growth: Lessons from Microeconomic Evidence,"
NBER Working Papers
6803, National Bureau of Economic Research, Inc.
- Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth. Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372 National Bureau of Economic Research, Inc.
- John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau.
- Marcelo Veracierto, 2004.
"Firing Costs and Business Cycle Fluctuations,"
2004 Meeting Papers
590, Society for Economic Dynamics.
- Eric Bartelsman & Stefano Scarpetta & Fabiano Schivardi, 2003. "Comparative Analysis of Firm Demographics and Survival: Micro-Level Evidence for the OECD Countries," OECD Economics Department Working Papers 348, OECD Publishing.
- Jeffrey R. Campbell, 1997.
"Entry, Exit, Embodied Technology, and Business Cycles,"
NBER Working Papers
5955, National Bureau of Economic Research, Inc.
- Jeffrey Campbell, 1998. "Entry, Exit, Embodied Technology, and Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 371-408, April.
- C.J. Krizan & John Haltiwanger & Lucia Foster, 2002.
"The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade,"
02-18, Center for Economic Studies, U.S. Census Bureau.
- Lucia Foster & John Haltiwanger & C.J. Krizan, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," NBER Working Papers 9120, National Bureau of Economic Research, Inc.
- Summers, Robert & Heston, Alan, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 327-68, May.
- Bart van Ark & Robert Inklaar & Robert H. McGuckin, 2002. "'Changing Gear' - Productivity, ICT and Services Industries: Europe and the United States," Economics Program Working Papers 02-02, The Conference Board, Economics Program.
- Raphael Bergoeing & Norman V. Loayza & Facundo Piguillem, 2011.
"The Aggregate and Complementary Impact of Micro Distortions,"
wp338, University of Chile, Department of Economics.
- Raphael Bergoeing & Norman V. Loayza & Facundo Piguillem, 2011. "The Aggregate and Complementary Impact of Micro Distortions," 2011 Meeting Papers 1426, Society for Economic Dynamics.
- Lorenzo Cappellari & Carlo Dell’Aringa & Marco Leonardi, 2012.
"Temporary Employment, Job Flows and Productivity: A Tale of Two Reforms,"
Royal Economic Society, vol. 122(562), pages F188-F215, 08.
- Lorenzo Cappellari & Carlo Dell'Aringa & Marco Leonardi, 2011. "Temporary Employment, Job Flows and Productivity: A Tale of two Reforms," CESifo Working Paper Series 3520, CESifo Group Munich.
- Cappellari, Lorenzo & Dell'Aringa, Carlo & Leonardi, Marco, 2012. "Temporary Employment, Job Flows and Productivity: A Tale of Two Reforms," IZA Discussion Papers 6526, Institute for the Study of Labor (IZA).
- Ferrari, Filippo, 2011.
"Lo sviluppo delle competenze nei contesti precari
[Skills development in precariousness: the dark side of flexibility?]," MPRA Paper 33284, University Library of Munich, Germany.
- POSCHKE, Markus, 2011. "The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology," Cahiers de recherche 08-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Hernan Moscoso Boedo & Toshihiko Mukoyama, 2012.
"Evaluating the effects of entry regulations and firing costs on international income differences,"
Journal of Economic Growth,
Springer, vol. 17(2), pages 143-170, June.
- Hernan J. Moscoso Boedo & Toshihiko Mukoyama, 2011. "Evaluating the Effects of Entry Regulations and Firing Costs on International Income Differences," Virginia Economics Online Papers 379, University of Virginia, Department of Economics.
- Alexandre Janiak, 2010. "Structural unemployment and the regulation of product market," Documentos de Trabajo 274, Centro de Economía Aplicada, Universidad de Chile.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcia Gastaldo).
If references are entirely missing, you can add them using this form.