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Regulation, Allocative Efficiency and Productivity in OECD Countries: Industry and Firm-Level Evidence

Author

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  • Jens Arnold

    (OECD)

  • Giuseppe Nicoletti

    (OECD)

  • Stefano Scarpetta

    (OECD)

Abstract

This paper relates diverging productivity performances across OECD countries over the past fifteen years to differences in the stringency of regulations in the product market. We first summarize industry-level evidence linking these diverging patterns to delays in service markets reforms in the wake of the ICT shock. The evidence we survey suggests that, especially in continental EU countries, tight regulation of services has slowed down growth in ICT-using sectors, which use intermediate service inputs intensively. Based on harmonised cross-country firm-level data, we then provide new evidence that one of the key channels through which inappropriate service regulations affect productivity growth is by hindering the allocation of resources towards the most dynamic and efficient firms. At the industry level, resources were allocated less efficiently across firms in countries where service regulations are less market-friendly. Firmlevel econometric estimates confirm that anti-competitive service regulations hamper productivity growth in ICT-using sectors, with a particularly pronounced effect on firms that are catching up to the technology frontier and that are close to international best practice. In other words, regulations hurt in particular those firms that have the potential to excel in domestic and international markets. Réglementation, allocation des ressources et productivité dans les pays de l'OCDE : évidence empirique au niveau des secteurs et des entreprises Cette étude établi un rapport entre trajectoires divergentes de productivité dans les pays OCDE pendant les dernières 15 années, et différences dans la rigidité de la réglementation sur les marchés des biens. La première partie du papier résume les résultats empiriques existants au niveau des industries sur le rapport entre productivité et réglementation dans les secteurs de services, ainsi que son rapport avec le choc technologique dans les technologies de l'information et de la communication (TIC). L’évidence empirique que nous examinons suggère qu’en particulier dans les pays d’Europe continentale la réglementation rigide a ralenti la croissance dans les secteurs «utilisateur des TIC», qui utilisent de manière intensive les services réglementés. Sur la base de données harmonisées au niveau des entreprises, ce papier présente ensuite des résultats nouveaux qui montrent que l’effet de la réglementation sur la croissance de la productivité se transmet principalement à travers des obstacles à l’allocation des ressources vers les entreprises les plus dynamiques et efficientes. L’allocation des ressources au sein de chaque industrie est moins efficiente dans les pays ayant une réglementation plus rigide dans les secteurs des services. Nos estimations économétriques au niveau des entreprises montrent ensuite que la réglementation des services réduit la croissance de la productivité dans les secteurs « utilisateur des TIC », avec un effet particulièrement prononcé sur les entreprises qui sont proches de la frontière technologique et y convergent rapidement. Autrement dit, la réglementation nuit surtout aux entreprises qui ont le plus haut potentiel de succès dans les marchés nationaux et internationaux.

Suggested Citation

  • Jens Arnold & Giuseppe Nicoletti & Stefano Scarpetta, 2008. "Regulation, Allocative Efficiency and Productivity in OECD Countries: Industry and Firm-Level Evidence," OECD Economics Department Working Papers 616, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:616-en
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    File URL: http://dx.doi.org/10.1787/241447806226
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    Cited by:

    1. Braunerhjelm, Pontus, 2010. "Entrepreneurship, Innovation and Economic Growth – Past experiences, current knowledge and policy implications," Working Papers 2010:2, Swedish Entrepreneurship Forum.
    2. World Bank, 2013. "Republic of Turkey Reform for Competitiveness Technical Assistance : Fostering Open and Efficient Markets through Effective Competition Policies," World Bank Other Operational Studies 17010, The World Bank.
    3. Crozet, M. & Milet, E. & Mirza, D., 2013. "The Discriminatory Effect of Domestic Regulations on International Trade in Services: Evidence from Firm-Level Data," Working papers 451, Banque de France.
    4. Bruno AMABLE & Iván LEDEZMA, 2013. "Export Performance And Product Market Regulation," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 37, pages 231-258.
    5. Paul Conway & Sean Dougherty & Artur Radziwill, 2010. "Long-term growth and policy challenges in the large emerging economies," OECD Economics Department Working Papers 755, OECD Publishing.
    6. Andrea Lasagni & Annamaria Nifo & Gaetano Vecchione, 2015. "Firm Productivity And Institutional Quality: Evidence From Italian Industry," Journal of Regional Science, Wiley Blackwell, vol. 55(5), pages 774-800, November.
    7. Daniela Maggioni, 2013. "Productivity Dispersion and its Determinants: The Role of Import Penetration," Journal of Industry, Competition and Trade, Springer, vol. 13(4), pages 537-561, December.
    8. Bournakis, Ioannis & Tsoukis, Christopher, 2016. "Government size, institutions, and export performance among OECD economies," Economic Modelling, Elsevier, vol. 53(C), pages 37-47.
    9. Che, Natasha Xingyuan, 2010. "Factor Endowment, Structural Change, and Economic Growth," MPRA Paper 22352, University Library of Munich, Germany.
    10. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    11. Conway, P. & Lysenko, T. & Barnard, G., 2011. "Product Market Regulation in Russia," Journal of the New Economic Association, New Economic Association, issue 10, pages 95-124.
    12. Pflüger, Michael & Suedekum, Jens, 2013. "Subsidizing firm entry in open economies," Journal of Public Economics, Elsevier, vol. 97(C), pages 258-271.
    13. Georges Assaf, A. & Gillen, David, 2012. "Measuring the joint impact of governance form and economic regulation on airport efficiency," European Journal of Operational Research, Elsevier, vol. 220(1), pages 187-198.
    14. Kox, Henk L.M. & Leeuwen, George van, 2011. "Measuring dynamic market selection by persistent scale inefficiencies - new methodology applied to EU business services," MPRA Paper 34986, University Library of Munich, Germany.
    15. Anna Bottasso & Maurizio Conti, 2010. "The productive effect of transport infrastructures: does road transport liberalization matter?," Journal of Regulatory Economics, Springer, vol. 38(1), pages 27-48, August.
    16. Maria Bas & Åsa Johansson & Fabrice Murtin & Giuseppe Nicoletti, 2016. "The effects of input tariffs on productivity: panel data evidence for OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(2), pages 401-424, May.
    17. Julien Hanoteau & Virginie Vial, 2014. "Grease or sand the wheel? The effects of individual bribe payments on aggregate productivity growth," EcoMod2014 6685, EcoMod.
    18. International Monetary Fund, 2012. "Republic of Belarus; Selected Issues," IMF Staff Country Reports 12/114, International Monetary Fund.
    19. Rene Söllner, 2010. "Product Diversification and Labor Productivity Dispersion in German Manufacturing Industries," Jena Economic Research Papers 2010-028, Friedrich-Schiller-University Jena.
    20. Adams, Samuel & Atsu, Francis, 2015. "Assessing the distributional effects of regulation in developing countries," Journal of Policy Modeling, Elsevier, vol. 37(5), pages 713-725.

    More about this item

    Keywords

    allocative efficiency; données individuelles d’entreprise; efficience dans l’allocation de ressources; firm-level data; product market regulation; productivity; productivité; réglementation dans les marchés des biens;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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