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Product market reform and innovation in the EU

Author

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  • Rachel Griffith

    () (Institute for Fiscal Studies and IFS and Manchester)

  • Rupert Harrison

    (Institute for Fiscal Studies)

  • Helen Simpson

    () (Institute for Fiscal Studies and CMPO, Bristol)

Abstract

European Union countries have implemented widespread reforms to product markets in order to stimulate competition, innovation and economic growth. We provide empirical evidence that the reforms carried out under the EU Single Market Programme (SMP) were associated with increased product market competition, as measured by a reduction in average profitability, and with a subsequent increase in innovation intensity and productivity growth for manufacturing sectors. In our analysis we exploit exogenous variation in the expected impact of the SMP across countries and industries to identify the effects of reforms on average profitability, and the effects of profitability on innovation and productivity growth.

Suggested Citation

  • Rachel Griffith & Rupert Harrison & Helen Simpson, 2006. "Product market reform and innovation in the EU," IFS Working Papers W06/17, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:06/17
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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