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Boosting productivity via innovation and adoption of new technologies : any role for labor market institutions?

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Author Info
Scarpetta, Stefano
Tressel, Thierry

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Abstract

The authors present empirical evidence on the determinants of industry-level multifactor productivity growth. They focus on"traditional factors,"including the process of technological catch up, human capital, and research and development (R&D), as well as institutional factors affecting labor adjustment costs. Their analysis is based on harmonized data for 17 manufacturing industries in 18 industrial economies over the past two decades. The disaggregated analysis reveals that the process of technological convergence takes place mainly in low-tech industries, while in high-tech industries, country leaders tend to pull ahead of the others. The link between R&D activity and productivity also depends on technological characteristics of the industries: while there is no evidence of R&D boosting productivity in low-tech industries, the effect is strong in high-tech industries, but the technology leaders tend to enjoy higher returns on R&D expenditure compared with followers. There is also evidence in the data that high labor adjustment costs (proxied by the strictness of employment protection legislation) can have a strong negative impact on productivity. In particular, when institutional settings do not allow wages or internal training to offset high hiring and firing costs, the latter reduce incentives for innovation and adoption of new technologies, and lead to lower productivity performance. Albeit drawn from the experience of industrial countries, this result may have relevant implications for many developing economies characterized by low relative wage flexibility and high labor adjustment costs.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3273.

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Date of creation: 01 Apr 2004
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Handle: RePEc:wbk:wbrwps:3273

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Keywords: Environmental Economics&Policies Economic Theory&Research Banks&Banking Reform Labor Policies Public Health Promotion Environmental Economics&Policies Economic Theory&Research Banks&Banking Reform Health Monitoring&Evaluation Economic Growth

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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.:
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  26. Stefano Scarpetta & Thierry Tressel, 2002. "Productivity and Convergence in a Panel of OECD Industries: Do Regulations and Institutions Matter?," OECD Economics Department Working Papers 342, OECD Economics Department. [Downloadable!]
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Full references

Cited by:
(explanations, 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.)

  1. Rita Almeida & Pedro Carneiro, 2005. "Enforcement of Regulation, Informal Labor and Firm Performance," IZA Discussion Papers 1759, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Mitchell, Donald, 2006. "Sugar in the Caribbean : adjusting to eroding preferences," Policy Research Working Paper Series 3802, The World Bank. [Downloadable!]
  3. Honohan, Patrick, 1990. "Monetary cooperation in the CFA zone," Policy Research Working Paper Series 389, The World Bank. [Downloadable!]
  4. Honohan, Patrick, 1990. "Price and monetary convergence in currency unions : the Franc and Rand zones," Policy Research Working Paper Series 390, The World Bank. [Downloadable!]
    Other versions:
  5. Spiegel, Mark M., 1990. "Threshold effects in international lending," Policy Research Working Paper Series 394, The World Bank. [Downloadable!]
    Other versions:
  6. Arias, Omar & Blom, Andreas & Bosch, Mariano & Cunningham, Wendy & Fiszbein, Ariel & Lopez Acevedo, Gladys & Maloney, William & Saavedra, Jaime & Sanchez-Paramo, Carolina & Santamaria, Mauricio & Siga, 2005. "Pending issues in protection, productivity growth, and poverty reduction," Policy Research Working Paper Series 3799, The World Bank. [Downloadable!]
  7. Almeida, Rita & Carneiro, Pedro, 2005. "Enforcement of labor regulation, informal labor, and firm performance," Policy Research Working Paper Series 3756, The World Bank. [Downloadable!]
  8. Sohnesen, Thomas Pave & Blom, Andreas, 2005. "Is formal lifelong learning a profitable investment for all of life ? How age, education level, and flexibility of provision affect rates of return to adult education in Colombia," Policy Research Working Paper Series 3800, The World Bank. [Downloadable!]
  9. Almeida, Rita & Carneiro, Pedro, 2006. "Enforcement of Regulation, Informal Labour, Firm Size and Firm Performance," CEPR Discussion Papers 5976, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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