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

Author

Listed:
  • Jens Matthias 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 Matthias 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
    DOI: 10.1787/241447806226
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    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;
    All these keywords.

    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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