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Regulation and Economic Performance: Product Market Reforms and Productivity in the OECD

Author

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  • Giuseppe Nicoletti
  • Stefano Scarpetta

Abstract

This paper assesses the implications of past and ongoing reforms in OECD product markets for the labour productivity gap, a key component of cross-country differences in GDP per capita. After a brief review of the theoretical literature, we bring together the results obtained in some of our empirical work over the past few years, discussing econometric approaches and their drawbacks. We then use these results to gauge the likely effect of further reforms. We distinguish effects on capital deepening and technical progress by examining the impact of regulations on investment (domestic and foreign) and multi-factor productivity. We focus on the effects of policies aimed at strengthening private governance (e.g. through privatization) and opening up access to markets where competition is economically viable. The results suggest that pro-competitive reforms tend to increase both investment and multifactor productivity and, through both these channels, they can lead to higher growth in GDP per capita. Ce papier analyse les implications des réformes dans les marchés des biens de la zone OCDE pour un des facteurs qui expliquent les différences internationales dans le PIB par tête : les écarts dans la productivité du travail. Après avoir examiné brièvement la littérature théorique, nous résumons les résultats de quelques unes des études empiriques que nous avons réalisées aux cours des dernières années, tout en discutant les approches économétriques utilisées et leurs limites. Nous utilisons ensuite ces résultats pour évaluer les effets qui pourraient être observés si les réformes étaient poussées plus loin à l’avenir. Nous distinguons les effets des réformes sur l’accroissement de l’intensité en capital et sur le progrès technique en nous appuyant sur trois études qui analysent l’impact de la régulation anti-concurrentielle sur l’investissement (national et de l’étranger) et la productivité multifactorielle. Nous nous concentrons sur les implications quantitatives au niveau macroéconomique des politiques visant à renforcer la gouvernance des entreprises (par exemple par la privatisation) et à éliminer les barrières réglementaires à l’accès dans les marchés où la concurrence est soutenable. Cet examen porte à conclure que les réformes qui accroissent les pressions concurrentielles sur les marchés des biens tendent à augmenter à la fois l’investissement et la productivité multifactorielle. Par ce biais, les réformes peuvent mener à une croissance plus soutenue du PIB par tête dans les pays qui les réalisent.

Suggested Citation

  • Giuseppe Nicoletti & Stefano Scarpetta, 2005. "Regulation and Economic Performance: Product Market Reforms and Productivity in the OECD," OECD Economics Department Working Papers 460, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:460-en
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    File URL: http://dx.doi.org/10.1787/726517007575
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    References listed on IDEAS

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    Cited by:

    1. Aghion, Philippe & Askenazy, Philippe & Bourlès, Renaud & Cette, Gilbert & Dromel, Nicolas, 2009. "Education, market rigidities and growth," Economics Letters, Elsevier, vol. 102(1), pages 62-65, January.
    2. Crafts, Nicholas, 2010. "The contribution of new technology to economic growth: lessons from economic history," Revista de Historia Económica, Cambridge University Press, vol. 28(03), pages 409-440, December.
    3. Michael Böheim & Eva Pichler, 2016. "Austria 2025 – Lack of Competition, Excessive Regulation and a Surfeit of Red Tape Constrain Growth," WIFO Monatsberichte (monthly reports), WIFO, vol. 89(12), pages 873-884, December.
    4. repec:crs:ecosta:es419-420b is not listed on IDEAS
    5. Michael Böheim, 2007. "WIFO White Paper: Competition and Regulation," WIFO Monatsberichte (monthly reports), WIFO, vol. 80(3), pages 219-232, March.
    6. Antonio Afonso & Carla Scaglioni, 2006. "An Assessment of Telecommunications Regulation Performance in the European Union," Working Papers Department of Economics 2006/07, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    7. Iulia Siedschlag, 2008. "Macroeconomic Differentials and Adjustment in the Euro Area," SUERF Studies, SUERF - The European Money and Finance Forum, number 2008/3 edited by Morten Balling.
    8. Nezih Guner & Gustavo Ventura & Xu Yi, 2008. "Macroeconomic Implications of Size-Dependent Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 721-744, October.
    9. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    10. Pammolli, Fabio & Cambini, Carlo & Giannaccari, Andrea, 2007. "Introduzione. Liberalizzazioni e concorrenza in Italia
      [Introduction. Liberalisation and competition in Italy]
      ," MPRA Paper 16125, University Library of Munich, Germany.
    11. Crafts, Nicholas, 2012. "British relative economic decline revisited: The role of competition," Explorations in Economic History, Elsevier, vol. 49(1), pages 17-29.
    12. Michael Böheim, 2009. "The Financial Market Crisis and Its Consequences for Competitive Policy," WIFO Monatsberichte (monthly reports), WIFO, vol. 82(12), pages 987-992, December.
    13. Fiori, Giuseppe & Nicoletti, Giuseppe & Scarpetta, Stefano & Schiantarelli, Fabio, 2007. "Employment Outcomes and the Interaction Between Product and Labor Market Deregulation: Are They Substitutes or Complements?," IZA Discussion Papers 2770, Institute for the Study of Labor (IZA).
    14. Philippe Aghion & Philippe Askenazy & Renaud Bourlès & Gilbert Cette & Nicolas Dromel, 2008. "Distance à la frontière technologique, rigidités de marché, éducation et croissance," Économie et Statistique, Programme National Persée, vol. 419(1), pages 11-30.
    15. Rovelli, Riccardo & Bruno, Randolph Luca, 2007. "Labor Market Policies and Outcomes: Cross Country Evidence for the EU-27," IZA Discussion Papers 3161, Institute for the Study of Labor (IZA).
    16. Boltho, Andrea & Eichengreen, Barry, 2008. "The Economic Impact of European Integration," CEPR Discussion Papers 6820, C.E.P.R. Discussion Papers.
    17. Valkonen, Laura, 2006. "Deregulation as a Means to Increase Competition and Productivity," Discussion Papers 1014, The Research Institute of the Finnish Economy.
    18. Gemmell, Norman & Kneller, Richard & McGowan, Danny & Sanz, Ismael & Sanz-Sanz, José F., 2013. "Corporate Taxation and Productivity Catch-Up: Evidence from European firms," Working Paper Series 2705, Victoria University of Wellington, Chair in Public Finance.
    19. International Monetary Fund, 2006. "Algeria; Selected Issues," IMF Staff Country Reports 06/101, International Monetary Fund.
    20. Randolph L. Bruno & Riccardo Rovelli, 2010. "Labour Market Policies and Outcomes in the Enlarged EU," Journal of Common Market Studies, Wiley Blackwell, vol. 48, pages 661-685, June.
    21. Lei Fang, 2009. "Entry barriers, competition, and technology adoption," FRB Atlanta Working Paper 2009-08, Federal Reserve Bank of Atlanta.
    22. Itzhak Goldberg & Lee Branstetter & John Gabriel Goddard & Smita Kuriakose, 2008. "Globalization and Ttechnology Absorption in Europe and Central Asia : The Role of Trade, FDI, and Cross-Border Knowledge Flows," World Bank Publications, The World Bank, number 6445.
    23. Balázs Égert & Antoine Goujard, 2014. "Strengthening Competition in Poland," OECD Economics Department Working Papers 1125, OECD Publishing.
    24. Barrett, Alan & Bergin, Adele & FitzGerald, John & Traistaru-Siedschlag, Iulia, 2006. "Economic Assessment of the Euro Area: Forecasts and Policy Analysis, Autumn Report 2006," Research Series, Economic and Social Research Institute (ESRI), number sustat22.
    25. Rovelli, Riccardo & Bruno, Randolph Luca, 2008. "Labor Market Policies, Institutions and Employment Rates in the EU-27," IZA Discussion Papers 3502, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    aggregate productivity and growth; données de panel; investissement; investment; panel data; productivité et croissance; regulation; régulation;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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