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Productivity Growth: The Effect of Market Regulations

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Author Info

  • Christopher Kent

    (Reserve Bank of Australia)

  • John Simon

    (Reserve Bank of Australia)

Abstract

This paper explores the effects of product and labour market regulation on growth in total factor productivity (TFP) using panel data from 1974–2003 for 18 OECD countries. Our regressions are specified so that labour and product market regulations can affect productivity both individually and in combination. While noting that the results are sensitive to the measure of labour market regulation used, we find some support for the hypothesis that lower initial levels of regulation are associated with higher TFP growth over subsequent years, and that labour and product market deregulation have more of an effect in combination. It also appears that product market deregulation has a larger positive effect on productivity growth the further a country is from the technological frontier.

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Bibliographic Info

Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2007-04.

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Date of creation: Jun 2007
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Handle: RePEc:rba:rbardp:rdp2007-04

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Keywords: structural reform; TFP growth; OECD; panel regression;

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References

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  1. Belorgey, N. & Lecat, R. & Maury, P-M., 2004. "Determinants of Productivity per Employee: an Empirical Estimation Using Panel Data," Working papers 110, Banque de France.
  2. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  3. John T. Addison & Paulino Teixeira & Jean-Luc Grosso, 2000. "The Effect of Dismissals Protection on Employment: More on a Vexed Theme," Southern Economic Journal, Southern Economic Association, vol. 67(1), pages 105-122, July.
  4. Dreze, Jacques & Bean, Charles R, 1990. " European Unemployment: Lessons from a Multicountry Econometric Study," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 135-65.
  5. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  6. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  7. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
  8. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, May.
  9. Paul Conway & Donato de Rosa & Giuseppe Nicoletti & Faye Steiner, 2006. "Regulation, Competition and Productivity Convergence," OECD Economics Department Working Papers 509, OECD Publishing.
  10. Giuseppe Nicoletti & Andrea Bassanini & Ekkehard Ernst & Sébastien Jean & Paulo Santiago & Paul Swaim, 2001. "Product and Labour Markets Interactions in OECD Countries," OECD Economics Department Working Papers 312, OECD Publishing.
  11. 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.
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Cited by:
  1. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2009. "The effect of employment protection legislation and financial market imperfections on investment: Evidence from a firm-level panel of EU countries," Banco de Espa�a Working Papers 0914, Banco de Espa�a.
  2. Thierry Tressel, 2008. "Does Technological Diffusion Explain Australia's Productivity Performance?," IMF Working Papers 08/4, International Monetary Fund.

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