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Productivity growth and competition in spanish manufacturing firms: What has happened in recent years?

  • Agustí Segarra-Blasco

    ()

    (Grup de Recerca d'Indústria i Territori (GRIT), Department d'Economia, Universitat Rovira i Virgili)

  • Mercedes Teruel-Carrizosa

    ()

    (Grup de Recerca d'Indústria i Territori (GRIT), Department d'Economia, Universitat Rovira i Virgili)

This paper addresses the issue of the relationship between productivity and market competition. In comparison to the economies of other European countries, the Spanish economy has been growing, while productivity growth has stagnated. Here we provide empirical evidence about the relationship between productivity and market competition from Spanish manufacturing firms at firm level between 1994 and 2004. Correcting for selection bias, our study pays special attention to the patterns of productivity growth between openness and non-openness firms. When market competition increases the effect on firms operating in domestic markets is positive but when the level of competition is high incentives to invest in innovation and productivity gains disappear. The empirical relationship between competition and productivity is an inverted U-shape, where productivity growth is highest at intermediate levels of competition. The productivity growth of firms operating in international markets is higher than that of non-openness firms, but when market competition rises they moderate their productivity growth. Our empirical results suggest that the correct competition policy in the Spanish economy should remove the barriers to competition in internal markets in order to increase the incentives for manufacturing firms to invest in innovation and productivity growth.

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File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/CREAP2006-09.pdf
File Function: First version, 2006
Download Restriction: no

File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/CREAP2006-09.pdf
File Function: Revised version, 2006
Download Restriction: no

Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number CREAP2006-09.

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Length: 45 pages
Date of creation: Dec 2006
Date of revision: Dec 2006
Handle: RePEc:xrp:wpaper:creap2006-09
Contact details of provider: Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
Phone: +34+934039653
Web page: http://www.pcb.ub.edu/xreap
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  1. Raquel Ortega Argiles & Rosina Moreno Serrano & Jordi Surinach Caralt, 2004. "Ownership structure and innovation: Is there a real link," Working Papers in Economics 111, Universitat de Barcelona. Espai de Recerca en Economia.
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