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Does Anti-Competitive Regulation Matter for Productivity? Evidence from European Firms

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Author Info

  • Arnold, Jens

    ()
    (OECD)

  • Nicoletti, Giuseppe

    ()
    (OECD)

  • Scarpetta, Stefano

    ()
    (OECD)

Abstract

Using firm-level data for a sample of European countries, we focus on the effects that product-market regulations have on firm-level TFP growth. We proxy regulatory burdens using the OECD indicators of sectoral non-manufacturing regulations. These allow accounting for both the direct effects of sectoral regulation on within-sector performance and the indirect effects of sectoral regulation on firms in other sectors through intersectoral input-output linkages. Our econometric specification of TFP is based on a "neo-Schumpeterian" empirical specification in which productivity improvements depend on growth at the global technological frontier and a catch up term. We assume that regulation can affect productivity growth both directly and by slowing down the rate of catch up. We find that product market regulations that curb competitive pressures tend to reduce the productivity performance of firms. The negative effect is particularly strong on firms characterised by an above-average productivity growth. Domestic regulations that affect all regulated firms in the same way seem to be more important than border regulations in this context.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5511.

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Length: 15 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5511

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Keywords: total factor productivity; firm-level data; product market regulation;

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  1. repec:hal:wpaper:halshs-00504161_v1 is not listed on IDEAS
  2. Bourlès, R. & Cette, G. & Lopez, J. & Mairesse, J. & Nicoletti, G., 2010. "Do product market regulations in upstream sectors curb productivity growth? Panel data evidence for OECD countries," Working papers 283, Banque de France.
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Cited by:
  1. Kox, Henk L.M. & van Leeuwen, George, 2013. "Market selection and scale inefficiency – A new methodology applied to EU business services," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 77-94.
  2. Kox, Henk L.M. & Leeuwen, George van, 2011. "Measuring dynamic market selection by persistent scale inefficiencies - new methodology applied to EU business services," MPRA Paper 34986, University Library of Munich, Germany.
  3. Heinz Hollenstein, 2013. "Wirtschaftliche Rahmenbedingungen als Element der Innovationspolitik," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, vol. 7(2), pages 47-55, June.
  4. Henk Kox & George van Leeuwen (Statistics Netherlands), 2012. "Dynamic market selection in EU business services," CPB Discussion Paper 210, CPB Netherlands Bureau for Economic Policy Analysis.

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