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Product market regulation and innovation efficiency

  • Chiara Franco

    ()

    (Department of International Economics, Institutions and Development, Catholic University of the Sacred Heart of Milan)

  • Fabio Pieri

    (Departamento de Estructura Economica (Economia Aplicada II), Universitat de Valencia)

  • Francesco Venturini

    ()

    (Department of Economics, Finance and Statistics, University of Perugia)

We study the role of upstream product market regulation (PMR) on innovation efficiency. By estimating a knowledge production function for a large sample of OECD industries through a stochastic frontier analysis, we find that service regulation remarkably reduces R&D efficiency in the manufacturing sector. These results are robust to controlling for the institutional setting of the technology, the labour and the financial market, as well as to various forms of heterogeneity such as, for instance, non-linearities in the effect of PMR. The marginal impact of upstream regulation is higher in less regulated economies indicating that large improvements in R&D efficiency cannot be achieved at the earlier stages of deregulation. We quantify total gains in R&D efficiency and patenting that could be obtained by late reforming countries by liberalizing the product market.

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File URL: ftp://147.156.210.157/RePEc/pdf/eec_1313.pdf
File Function: First version, 2013
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Paper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1313.

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Length: 37 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:eec:wpaper:1313
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  1. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, vol. 65(1), pages 263-293, January.
  2. Keith E. Maskus & Rebecca Neumann & Tobias Seidel, 2011. "How National and International Financial Development Affect Industrial R&D," CESifo Working Paper Series 3480, CESifo Group Munich.
  3. Abdul Abiad & Enrica Detragiache & Thierry Tressel, 2010. "A New Database of Financial Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 281-302, June.
  4. von Kalckreuth, Ulf & von Furstenberg, George M., 2006. "Dependence on external finance: an inherent industry characteristic?," Discussion Paper Series 1: Economic Studies 2006,30, Deutsche Bundesbank, Research Centre.
  5. Park, Walter G., 2008. "International patent protection: 1960-2005," Research Policy, Elsevier, vol. 37(4), pages 761-766, May.
  6. 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.
  7. Renaud Bourlès & Gilbert Cette & Jimmy Lopez & Jacques Mairesse & Giuseppe Nicoletti, 2010. "Do Product Market Regulations in Upstream Sectors Curb Productivity Growth?: Panel Data Evidence for OECD Countries," OECD Economics Department Working Papers 791, OECD Publishing.
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