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Knock-on effect of non-manufacturing regulation on manufacturing sectors efficiency and productivity

  • Fioramanti, Marco

Since the mid of nineties European countries are registering an anemic growth of economic activity, in large part due to the dynamic of productivity. In 2010 the European Council adopted a new Agenda, Euro2020, which aim is to boost growth also improving European competitiveness. Regulation is one of the main factors influencing competitiveness. This paper focuses on the determinants of Total Factor Productivity (TFP) growth in 13 manufacturing sectors in a panel of 18 OECD countries from 1975 to 2007. Using the Stochastic Frontier Approach applied to the EU-KLEMS and OECD’s Regulation Impact Indicator database I found that, given the strong negative relationship between regulation and Technical Efficiency, which is one of the drivers of TFP, countries with still tight regulation in services could/should reduced it in order to improve their economic performance without detriment for public finances.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32237.

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Date of creation: 14 Jul 2011
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Handle: RePEc:pra:mprapa:32237
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  1. Olivier Blanchard, 2004. "The Economic Future of Europe," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 3-26, Fall.
  2. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  3. Philippe Aghion & Peter Howitt, 2006. "Joseph Schumpeter Lecture Appropriate Growth Policy: A Unifying Framework," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 269-314, 04-05.
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  5. Sharma, Subhash C. & Sylwester, Kevin & Margono, Heru, 2007. "Decomposition of total factor productivity growth in U.S. states," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(2), pages 215-241, May.
  6. Karel Havik & Kieran Mc Morrow & Werner R�ger & Alessandro Turrini, 2008. "The EU-US total factor productivity gap : An industry perspective," European Economy - Economic Papers 339, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  7. Wang, Hung-Jen & Ho, Chia-Wen, 2009. "Estimating fixed-effect panel stochastic frontier models by model transformation," MPRA Paper 31081, University Library of Munich, Germany.
  8. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  9. Griffin, Ronald C. & Montgomery, John M. & Rister, M. Edward, 1987. "Selecting Functional Form In Production Function Analysis," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 12(02), December.
  10. Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
  11. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  12. Paul Conway & Giuseppe Nicoletti, 2006. "Product Market Regulation in the Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights," OECD Economics Department Working Papers 530, OECD Publishing.
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