Regulation, Resource Reallocation and Productivity Growth

European Investment Bank Papers, Vol. 16, No. 1, pp. 90-115, 2011

26 Pages Posted: 13 Jan 2012

See all articles by Jens Matthias Arnold

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; IZA Institute of Labor Economics

Date Written: December 21, 2011

Abstract

In this paper, we review theory and evidence on the links between product market regulations that curb competitive pressures, the efficiency of resource allocation and productivity growth. We show that product market regulations differ across countries and industries and have evolved differently over time. We argue that differences in regulation have played an important role in driving resource allocation and productivity outcomes. Countries and industries where direct and indirect regulatory burdens are lighter have generally experienced the highest GDP per capita and productivity growth rates. Moreover, where regulatory burdens are lighter, the reallocation of resources towards the highest-productivity firms is stronger. The impacts of inappropriate regulations on aggregate and firm-level productivity performance are estimated to be quantitatively important and thus, reforming such regulations can provide a significant boost to potential growth in OECD economies.

Keywords: Productivity, product market regulation, allocative efficiency

JEL Classification: D24, E23, K23, L11, L51

Suggested Citation

Arnold, Jens Matthias and Nicoletti, Giuseppe and Scarpetta, Stefano, Regulation, Resource Reallocation and Productivity Growth (December 21, 2011). European Investment Bank Papers, Vol. 16, No. 1, pp. 90-115, 2011. Available at SSRN: https://ssrn.com/abstract=1983971

Jens Matthias Arnold

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

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Giuseppe Nicoletti (Contact Author)

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)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
204
rank
141,868
Abstract Views
1,314
PlumX Metrics