Regulation and Productivity Performance

Posted: 29 Feb 2008

See all articles by Nicholas Crafts

Nicholas Crafts

University of Warwick; Centre for Economic Policy Research (CEPR)

Date Written: 2006

Abstract

The paper reviews theory and evidence on the ways in which regulation affects productivity outcomes. In a context of endogenous growth, it is argued that traditional measures of compliance costs miss the potentially most important impacts of regulation on productivity which occur through changes in incentives to invest and to innovate. Recent attempts to measure cross-country variations in the strength of product-market and employment regulation are considered and some weaknesses are highlighted. Nevertheless, consistent with endogenous growth models, there appears to be quite strong evidence that regulations which inhibit entry into product markets have an adverse effect on TFP growth in OECD countries. Although there are some discrepancies in the evidence, on most measures the UK appears lightly regulated relative to France and Germany, and this may have contributed to a reduction in the recent past in the UK's TFP gap.

Suggested Citation

Crafts, Nicholas, Regulation and Productivity Performance ( 2006). Oxford Review of Economic Policy, Vol. 22, Issue 2, pp. 186-202, 2006, Available at SSRN: https://ssrn.com/abstract=1095990 or http://dx.doi.org/10.1093/oxrep/grj012

Nicholas Crafts (Contact Author)

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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