IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_2945.html
   My bibliography  Save this paper

Barriers to Entry, Deregulation and Workplace Training: A Theoretical Model with Evidence from Europe

Author

Listed:
  • Andrea Bassanini
  • Giorgio Brunello

Abstract

We study the impact of barriers to entry on workplace training. Our theoretical model indicates that there are two contrasting effects of deregulation on training. With a given number of firms, deregulation reduces the size of rents per unit of output that firms can reap by training their employees. Yet, the number of firms increases, thereby raising output and profit gains from training and improving investment incentives. The latter effect always prevails. Our empirical analysis, based on repeated cross-section data from 15 European countries and 12 industries, confirms the predictions of the model and shows that deregulation increases training incidence.

Suggested Citation

  • Andrea Bassanini & Giorgio Brunello, 2010. "Barriers to Entry, Deregulation and Workplace Training: A Theoretical Model with Evidence from Europe," CESifo Working Paper Series 2945, CESifo.
  • Handle: RePEc:ces:ceswps:_2945
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp2945.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries [Appropriate growth policy: a unifying framework]," Economic Policy, CEPR;CES;MSH, vol. 24(58), pages 349-402.
    2. Bassanini, Andrea & Brunello, Giorgio, 2007. "Barriers to Entry, Deregulation and Workplace Training," IZA Discussion Papers 2746, Institute of Labor Economics (IZA).
    3. Philippe Aghion & Robin Burgess & Stephen J. Redding & Fabrizio Zilibotti, 2008. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," American Economic Review, American Economic Association, vol. 98(4), pages 1397-1412, September.
    4. Jeffrey M. Perloff & Steven C. Salop, 1985. "Equilibrium with Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 107-120.
    5. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, vol. 45(1), pages 167-186, January.
    6. Jan Boone, 2000. "Competitive Pressure: The Effects on Investments in Product and Process Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 549-569, Autumn.
    7. Richard E. Baldwin & Rikard Forslid & Jan I. Haaland, 1996. "Investment Creation and Diversion in Europe," The World Economy, Wiley Blackwell, vol. 19(6), pages 635-659, November.
    8. Anita Wölfl & Isabelle Wanner & Tomasz Koźluk & Giuseppe Nicoletti, 2009. "Ten Years of Product Market Reform in OECD Countries: Insights from a Revised PMR Indicator," OECD Economics Department Working Papers 695, OECD Publishing.
    9. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 879-907.
    10. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
    11. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    12. Micco, Alejandro & Pagés, Carmen, 2006. "The Economic Effects of Employment Protection: Evidence from International Industry-Level Data," IZA Discussion Papers 2433, Institute of Labor Economics (IZA).
    13. G. M.P. Swann, 2009. "The Economics of Innovation," Books, Edward Elgar Publishing, number 13211.
    14. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-685, May.
    15. Haltiwanger, John & Scarpetta, Stefano & Schweiger, Helena, 2006. "Assessing job flows across countries : the role of industry, firm size, and regulations," Policy Research Working Paper Series 4070, The World Bank.
    16. Gersbach, Hans & Schmutzler, Armin, 2001. "A Product Market Theory of Worker Training," IZA Discussion Papers 327, Institute of Labor Economics (IZA).
    17. Lorraine Dearden & Howard Reed & John Van Reenen, 2006. "The Impact of Training on Productivity and Wages: Evidence from British Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(4), pages 397-421, August.
    18. David H. Autor, 2001. "Why Do Temporary Help Firms Provide Free General Skills Training?," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1409-1448.
    19. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    20. Giuseppe Nicoletti & Stefano Scarpetta, 2003. "Regulation, productivity and growth: OECD evidence [‘A model of growth through creative destruction’]," Economic Policy, CEPR;CES;MSH, vol. 18(36), pages 9-72.
    21. Maria Guadalupe, 2007. "Product Market Competition, Returns to Skill, and Wage Inequality," Journal of Labor Economics, University of Chicago Press, vol. 25(3), pages 439-474.
    22. Edward P. Lazear, 2009. "Firm-Specific Human Capital: A Skill-Weights Approach," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 914-940, October.
    23. Giorgio Brunello & Pietro Garibaldi & Etienne Wasmer, 2007. "Education and training in Europe," SciencePo Working papers Main hal-03415950, HAL.
    24. Pål Schøne, 2007. "Does increased international competition increase the need for training?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(2), pages 151-155.
    25. Giuseppe Nicoletti & Stefano Scarpetta, 2003. "Regulation, Productivity and Growth: OECD Evidence," OECD Economics Department Working Papers 347, OECD Publishing.
    26. Fiorio, Carlo V. & Florio, Massimo, 2011. "«Would you say that the price you pay for electricity is fair?» Consumers' satisfaction and utility reforms in the EU15," Energy Economics, Elsevier, vol. 33(2), pages 178-187, March.
    27. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms9850c12h1p is not listed on IDEAS
    28. James M. Malcomson, 1997. "Contracts, Hold-Up, and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 1916-1957, December.
    29. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, June.
    30. Rachel Griffith & Rupert Harrison & Helen Simpson, 2010. "Product Market Reform and Innovation in the EU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 389-415, June.
    31. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
    32. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage bargaining with on-the-job search: theory and evidence," Post-Print hal-03471856, HAL.
    33. Tor Jakob Klette, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-476, December.
    34. Joakim Gullstrand & Helena Johansson, 2005. "The Disciplinary Effect of the Single Market on Swedish Firms," Open Economies Review, Springer, vol. 16(4), pages 381-398, October.
    35. Etienne Wasmer, 2006. "General versus Specific Skills in Labor Markets with Search Frictions and Firing Costs," American Economic Review, American Economic Association, vol. 96(3), pages 811-831, June.
    36. Gersbach, Hans & Schmutzler, Armin, 2005. "The Effects of Globalization on Worker Training," CEPR Discussion Papers 4879, C.E.P.R. Discussion Papers.
    37. Picchio, Matteo & van Ours, Jan C., 2011. "Market imperfections and firm-sponsored training," Labour Economics, Elsevier, vol. 18(5), pages 712-722, October.
    38. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Oxford University Press, vol. 68(3), pages 467-492.
    39. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
    40. Faye Steiner, 2004. "The Market Response to Restructuring: A Behavioral Model," Journal of Regulatory Economics, Springer, vol. 25(1), pages 59-80, January.
    41. Paul Conway & Giuseppe Nicoletti, 2006. "Product Market Regulation in the Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights," OECD Economics Department Working Papers 530, OECD Publishing.
    42. Bassanini, Andrea & Brunello, Giorgio, 2011. "Barriers to entry, deregulation and workplace training: A theoretical model with evidence from Europe," European Economic Review, Elsevier, vol. 55(8), pages 1152-1176.
    43. Barron, John M. & Taylor, Beck A. & Umbeck, John R., 2004. "Number of sellers, average prices, and price dispersion," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1041-1066, November.
    44. Azmat, Ghazala & Manning, Alan & Van Reenen, John, 2007. "Privatization, entry regulation and the decline of labor's share of GDP: a cross-country analysis of the network industries," LSE Research Online Documents on Economics 4552, London School of Economics and Political Science, LSE Library.
    45. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    46. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    47. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-569, June.
    48. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
    49. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, January.
    50. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September.
    51. Duso, Tomaso & Roller, Lars-Hendrik, 2003. "Endogenous deregulation: evidence from OECD countries," Economics Letters, Elsevier, vol. 81(1), pages 67-71, October.
    52. Klette, Tor Jakob, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-476, December.
    53. 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.
    54. 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.
    55. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-632, Nov.-Dec..
    56. Pinkse, Joris & Slade, Margaret E., 2004. "Mergers, brand competition, and the price of a pint," European Economic Review, Elsevier, vol. 48(3), pages 617-643, June.
    57. James M. Malcomson, 1997. "Contracts, Hold-Up, and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 1916-1957, December.
    58. Conti, Gabriella, 2005. "Training, productivity and wages in Italy," Labour Economics, Elsevier, vol. 12(4), pages 557-576, August.
    59. Ballot, Gerard & Fakhfakh, Fathi & Taymaz, Erol, 2001. "Firms' human capital, R&D and performance: a study on French and Swedish firms," Labour Economics, Elsevier, vol. 8(4), pages 443-462, September.
    60. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rachel Griffith & Rupert Harrison & Helen Simpson, 2010. "Product Market Reform and Innovation in the EU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 389-415, June.
    2. Schiantarelli, Fabio, 2005. "Product Market Regulation and Macroeconomic Performance: A Review of Cross Country Evidence," IZA Discussion Papers 1791, Institute of Labor Economics (IZA).
    3. Tina Hinz & Jens Mohrenweiser, 2019. "Competition, Institutions and Company-sponsored Training," Economics of Education Working Paper Series 0162, University of Zurich, Department of Business Administration (IBW).
    4. John S Heywood & Uwe Jirjahn & Annika Pfister, 2020. "Product market competition and employer provided training in Germany [Technical change, inequality and the labor market]," Industrial and Corporate Change, Oxford University Press, vol. 29(2), pages 533-556.
    5. Philippe Aghion & Peter Howitt & Susanne Prantl, 2015. "Patent rights, product market reforms, and innovation," Journal of Economic Growth, Springer, vol. 20(3), pages 223-262, September.
    6. Renaud Bourlès & Gilbert Cette & Jimmy Lopez & Jacques Mairesse & Giuseppe Nicoletti, 2013. "Do Product Market Regulations In Upstream Sectors Curb Productivity Growth? Panel Data Evidence For OECD Countries," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1750-1768, December.
    7. Elena Podrecca, 2013. "Riforme del mercato dei prodotti e crescita della produttivit?. Teoria ed evidenza empirica," ECONOMIA E SOCIET? REGIONALE, FrancoAngeli Editore, vol. 0(2), pages 10-41.
    8. Anderton, Robert & Di Lupidio, Benedetta & Jarmulska, Barbara, 2020. "The impact of product market regulation on productivity through firm churning: Evidence from European countries," Economic Modelling, Elsevier, vol. 91(C), pages 487-501.
    9. Michele Raitano & Francesco Vona, 2017. "Competition, firm size and returns to skills: Evidence from currency shocks and market liberalisations," The World Economy, Wiley Blackwell, vol. 40(12), pages 2676-2703, December.
    10. repec:hal:spmain:info:hdl:2441/2bppdssek78iho8jevmfdq9vu2 is not listed on IDEAS
    11. Bouis, Romain & Duval, Romain & Eugster, Johannes, 2020. "How fast does product market reform pay off? New evidence from non-manufacturing industry deregulation in advanced economies," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 198-217.
    12. Philipp Lergetporer & Jens Ruhose & Lisa Simon, 2018. "Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector," CESifo Working Paper Series 7274, CESifo.
    13. Valkonen, Laura, 2006. "Deregulation as a Means to Increase Competition and Productivity," Discussion Papers 1014, The Research Institute of the Finnish Economy.
    14. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
    15. MARSCHINSKI Robert & DE AMORES HERNANDEZ Antonio & AMOROSO Sara & BAUER Peter & CARDANI Roberta & CSEFALVAY Zoltan & GENTY Aurelien & GKOTSIS Petros & GREGORI Wildmer & GRASSANO Nicola & HERNANDEZ GUE, 2021. "EU competitiveness: recent trends, drivers, and links to economic policy: A Synthesis Report," JRC Research Reports JRC123232, Joint Research Centre (Seville site).
    16. Amable, Bruno & Demmou, Lila & Lezdema, Ivan, 2007. "Competition, Innovation and Distance to Frontier," CEPREMAP Working Papers (Docweb) 0706, CEPREMAP.
    17. Nauro F. Campos & Paul De Grauwe & Yuemei Ji, 2017. "Structural Reforms, Growth and Inequality: An Overview of Theory, Measurement and Evidence," CESifo Working Paper Series 6812, CESifo.
    18. Bassanini, Andrea & Garnero, Andrea, 2013. "Dismissal protection and worker flows in OECD countries: Evidence from cross-country/cross-industry data," Labour Economics, Elsevier, vol. 21(C), pages 25-41.
    19. Paolo Buccirossi & Lorenzo Ciari & Tomaso Duso & Giancarlo Spagnolo & Cristiana Vitale, 2013. "Competition Policy and Productivity Growth: An Empirical Assessment," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1324-1336, October.
    20. Francesco Daveri & Rémy Lecat & Maria Laura Parisi, 2016. "Service Deregulation, Competition, and the Performance of French and Italian Firms," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(3), pages 278-302, July.
    21. Guglielmo Barone & Federico Cingano, 2011. "Service Regulation and Growth: Evidence from OECD Countries," Economic Journal, Royal Economic Society, vol. 121(555), pages 931-957, September.

    More about this item

    Keywords

    training; product market competition; Europe;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2945. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.