Competition and Economic Growth: an Empirical Analysis for a Panel of 20 OECD Countries
AbstractThis paper aims at analyzing, from an empirical point of view, the relationship between product market competition and economic growth, using the data on multi-factor productivity for a panel of 20 OECD countries over a period 1995-2005, and considering the role of the distance from the technological frontier in the growth process. Section A examines the impact of economic freedom and of the distance to frontier on the level and on the growth rate of multi-factor productivity. The analysis distinguishes between the indicators of business freedom and trade freedom, as proxies for the competitive pressures coming from domestic market and from foreign market. Then, trade liberalizations are more beneficial for the countries far from the frontier, because they can exploit the opportunities given by international trade also in order to adopt the existing technologies developed by the advanced economies. On the other hand, business liberalizations are more advantageous for the countries close to the frontier, because the elimination of regulatory barriers increases the possibility of entry in the market and then rises the potential competition to the incumbent firms. Section B studies the effect of product market regulation, employment protection legislation and of the distance to frontier on the level and on the growth rate of multi-factor productivity. Product market liberalization as well as labour market deregulation determine an increase of total factor productivity: moreover, the interaction of market rigidities with the distance to the frontier mostly displays an innovationenhancing effect, since the positive effect of market liberalizations on TFP is higher for the countries close to the frontier, where the existing technology level would reinforce the incentive for innovation.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 20127.
Date of creation: Dec 2009
Date of revision:
multi-factor productivity; economic freedom; product market regulation; employment protection legislation; distance to frontier;
Find related papers by JEL classification:
- L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-30 (All new papers)
- NEP-COM-2010-01-30 (Industrial Competition)
- NEP-EFF-2010-01-30 (Efficiency & Productivity)
- NEP-REG-2010-01-30 (Regulation)
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