IDEAS home Printed from https://ideas.repec.org/p/oec/ecoaaa/996-en.html
   My bibliography  Save this paper

Public Policy and Resource Allocation: Evidence from Firms in OECD Countries

Author

Listed:
  • Dan Andrews

    (OECD)

  • Federico Cingano

    (Bank of Italy)

Abstract

The correlation between a firm’s size and its productivity level varies considerably across OECD countries, suggesting that some countries are more successful at channelling resources to high productivity firms than others. Accordingly, we examine the extent to which regulations affecting product, labour and credit markets influence productivity, via their effect on the efficiency of resource allocation. Our results suggest that there is an economically and statistically robust negative relationship between policy-induced frictions and productivity, though the specific channel depends on the policy considered. In the case of employment protection legislation, product market regulations (including barriers to entry and bankruptcy legislation) and restrictions on foreign direct investment, this is largely traceable to the worsening of allocative efficiency (i.e. a lower correspondence between a firm’s size and its productivity level). By contrast, financial market under-development tends to be associated with a higher fraction of low productivity relative to high productivity firms. Furthermore, stringent regulations are more disruptive to resource allocation in more innovative sectors, though the nature of innovation turns out to be important. Politiques publiques et allocation des ressources : Des preuves provenant des entreprises dans les pays de l'OCDE La corrélation entre la taille d’une entreprise et son niveau de productivité varie considérablement selon les pays de l’OCDE, ce qui suggère que certains pays réussissent mieux à affecter les ressources à des entreprises à forte productivité que d’autres. Par conséquent, nous examinons dans quelle mesure les réglementations affectant les marchés des produits, du travail et du crédit influent sur la productivité, grâce à leur effet sur l’efficacité de l’affectation des ressources. Nos résultats suggèrent qu’il existe une relation économiquement et statistiquement négative robuste entre les frictions induites par la politique et la productivité, même si le canal spécifique dépend de la politique considérée. Dans le cas de la législation sur la protection de l’emploi, de la réglementation des marchés de produits (y compris les barrières à l’entrée et à la législation sur les faillites) et des restrictions à l’investissement direct à l’étranger, c’est en grande partie attribuable à la détérioration de l’efficacité allocative (i.e. une faible correspondance entre la taille de l’entreprise et son niveau de productivité). En revanche, le sous-développement du marché financier tend à être associe à une proportion plus élevée des entreprises à faible productivité par rapport aux entreprises à forte productivité. En outre, les réglementations strictes perturbent plus l’allocation des ressources dans des secteurs plus innovants, bien que la nature de l’innovation s’avère être importante.

Suggested Citation

  • Dan Andrews & Federico Cingano, 2012. "Public Policy and Resource Allocation: Evidence from Firms in OECD Countries," OECD Economics Department Working Papers 996, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:996-en
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1787/5k9158wpf727-en
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas Herndon & Michael Ash & Robert Pollin, 2014. "Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff," Cambridge Journal of Economics, Oxford University Press, vol. 38(2), pages 257-279.
    2. Checherita-Westphal, Cristina & Rother, Philipp, 2010. "The impact of high and growing government debt on economic growth: an empirical investigation for the euro area," Working Paper Series 1237, European Central Bank.
    3. Andrea Pescatori & Damiano Sandri & John Simon, 2014. "Debt and Growth; Is There a Magic Threshold?," IMF Working Papers 14/34, International Monetary Fund.
    4. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    5. Panizza, Ugo & Presbitero, Andrea F., 2014. "Public debt and economic growth: Is there a causal effect?," Journal of Macroeconomics, Elsevier, vol. 41(C), pages 21-41.
    6. Crespo Cuaresma, Jesus & Doppelhofer, Gernot, 2007. "Nonlinearities in cross-country growth regressions: A Bayesian Averaging of Thresholds (BAT) approach," Journal of Macroeconomics, Elsevier, vol. 29(3), pages 541-554, September.
    7. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2011. "The real effects of debt," BIS Working Papers 352, Bank for International Settlements.
    8. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, vol. 100(2), pages 573-578, May.
    9. Carmen M. Reinhart & Vincent R. Reinhart & Kenneth S. Rogoff, 2012. "Public Debt Overhangs: Advanced-Economy Episodes since 1800," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 69-86, Summer.
    10. Kourtellos, Andros & Stengos, Thanasis & Tan, Chih Ming, 2013. "The effect of public debt on growth in multiple regimes," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 35-43.
    11. Baum, Anja & Checherita-Westphal, Cristina & Rother, Philipp, 2013. "Debt and growth: New evidence for the euro area," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 809-821.
    12. Pier Carlo Padoan & Urban Sila & Paul van den Noord, 2012. "Avoiding debt traps: Fiscal consolidation, financial backstops and structural reforms," OECD Journal: Economic Studies, OECD Publishing, vol. 2012(1), pages 151-177.
    13. Caner, Mehmet & Grennes,Thomas & Koehler-Geib, Fritzi, 2010. "Finding the tipping point -- when sovereign debt turns bad," Policy Research Working Paper Series 5391, The World Bank.
    14. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "From Financial Crash to Debt Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 1676-1706, August.
    15. Markus Eberhardt & Andrea Presbitero, 2013. "This Time They Are Different; Heterogeneity and Nonlinearity in the Relationship Between Debt and Growth," IMF Working Papers 13/248, International Monetary Fund.
    16. Ugo Panizza & Andrea F. Presbitero, 2013. "Public Debt and Economic Growth in Advanced Economies: A Survey," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 149(II), pages 175-204, June.
    17. Douglas Sutherland & Sonia Araujo & Balázs Égert & Tomasz Koźluk, 2009. "Infrastructure Investment: Links to Growth and the Role of Public Policies," OECD Economics Department Working Papers 686, OECD Publishing.
    18. Pier Carlo Padoan & Urban Sila & Paul van den Noord, 2012. "Avoiding Debt Traps: Financial Backstops and Structural Reforms," OECD Economics Department Working Papers 976, OECD Publishing.
    19. Jaejoon Woo & Manmohan S. Kumar, 2010. "Public Debt and Growth," IMF Working Papers 10/174, International Monetary Fund.
    20. Deniz Baglan & Emre Yoldas, 2013. "Government debt and macroeconomic activity: a predictive analysis for advanced economies," Finance and Economics Discussion Series 2013-05, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    allocative efficiency; données sur les entreprises; effectifs de migrants; firm level data; productivity; productivité; regulations; régulation;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:996-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/edoecfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.