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Does Anti-Competitive Regulation Matter for Productivity? Evidence from European Firms


Jens Matthias Arnold


Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Giuseppe Nicoletti


Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Stefano Scarpetta


OECD, Directorate for Employment, Labour and Social Affairs; World Bank - Social Protection Unit (HDNSP); Institute for the Study of Labor (IZA)


IZA Discussion Paper No. 5511

Abstract:     
Using firm-level data for a sample of European countries, we focus on the effects that product-market regulations have on firm-level TFP growth. We proxy regulatory burdens using the OECD indicators of sectoral non-manufacturing regulations. These allow accounting for both the direct effects of sectoral regulation on within-sector performance and the indirect effects of sectoral regulation on firms in other sectors through intersectoral input-output linkages. Our econometric specification of TFP is based on a "neo-Schumpeterian" empirical specification in which productivity improvements depend on growth at the global technological frontier and a catch up term. We assume that regulation can affect productivity growth both directly and by slowing down the rate of catch up. We find that product market regulations that curb competitive pressures tend to reduce the productivity performance of firms. The negative effect is particularly strong on firms characterised by an above-average productivity growth. Domestic regulations that affect all regulated firms in the same way seem to be more important than border regulations in this context.

Number of Pages in PDF File: 15

Keywords: total factor productivity, firm-level data, product market regulation

JEL Classification: D24, L11, L51

working papers series


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Date posted: February 21, 2011  

Suggested Citation

Arnold, Jens Matthias and Nicoletti, Giuseppe and Scarpetta, Stefano, Does Anti-Competitive Regulation Matter for Productivity? Evidence from European Firms. IZA Discussion Paper No. 5511. Available at SSRN: http://ssrn.com/abstract=1765677

Contact Information

Jens Matthias Arnold (Contact Author)
Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )
2 rue Andre Pascal
Paris Cedex 16, 75775
France
Giuseppe Nicoletti
Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )
2 rue Andre Pascal
Paris Cedex 16, MO 63108
France
+33 1 4524 8730 (Phone)
+33 1 4524 1347 (Fax)
Stefano Scarpetta
OECD, Directorate for Employment, Labour and Social Affairs ( email )
2 rue Andre Pascal
Paris Cedex 16, 75016
France
+33 1 45 24 19 88 (Phone)
+33 1 45 24 18 59 (Fax)
World Bank - Social Protection Unit (HDNSP) ( email )
Human Development Network
1818, H Street, N.W.
Washington, DC 20433
United States
202-458-1119 (Phone)
202-522-7247 (Fax)
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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