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Competition in Services and Efficiency of Manufacturing Firms:Does “Liberalization” Matter?

  • Emanuele Forlani

In developed economies, services form an increasing proportion of inputs employed by manufacturing firms. While downstream firms act in a very competitive environment, services often operate in protected or highly regulated markets. In this paper, I empirically investigate whether the degree of competition in services affects the efficiency of manufacturing firms through services production inputs. By using both firm and sector level data for France, through input-output analysis I show that variations in the upstream competition, especially in network industries, affect the average productivity level in manufacturing industry: an increase in average markups is associated with a reduction in manufacturing productivity. The findings differ according to firms size and initial efficiency level: in the short run less efficient and small firms are relatively mostly harmed by an uncompetitive service sector.

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File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp311.pdf
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Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 31112.

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Date of creation: 2012
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Handle: RePEc:lic:licosd:31112
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  1. Andrea Ariu & Giordano Mion, 2010. "Trade in services : IT and task content," Working Paper Research 200, National Bank of Belgium.
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  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," Working Papers halshs-00504161, HAL.
  8. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: An Inverted-U Relationship," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 701-728, May.
  9. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
  10. Konings, Jozef & Vandenbussche, Hylke, 2008. "Heterogeneous responses of firms to trade protection," Journal of International Economics, Elsevier, vol. 76(2), pages 371-383, December.
  11. FORLANI, Emanuele, 2010. "Irish firms' productivity and imported inputs," CORE Discussion Papers 2010015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Tim Coelli & Antonio Estache & Sergio Perelman & Lourdes Trujillo, 2003. "A Primer on Efficiency Measurement for Utilities and Transport Regulators," World Bank Publications, The World Bank, number 15149, June.
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  14. מחקר - ביטוח לאומי, 2005. "Annual Survey 2004," Working Papers 16, National Insurance Institute of Israel.
  15. Fernandes, Ana M. & Paunov, Caroline, 2008. "Foreign direct investment in services and manufacturing productivity growth: evidence for Chile," Policy Research Working Paper Series 4730, The World Bank.
  16. Micael Castanheira De Moura & Tito Boeri & Ricardo Faini & Vincenzo Galasso, 2006. "Structural reforms without prejudice," ULB Institutional Repository 2013/10017, ULB -- Universite Libre de Bruxelles.
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