Competition, Technological Change and Productivity Gains: The Contribution of Information Technologies

23 Pages Posted: 28 Jun 2019

Date Written: June 27, 2019

Abstract

This paper addresses the empirical relationship between the level of competition and the rate of productivity growth across thirty sectors of the French production system during the period 1978- 2015. It shows that there exists an optimal level of competition for each sector that is defined by the mark-up that maximizes the growth rate of labor productivity. The information technologies sectors have the highest mark-ups for maximizing productivity growth. The persistence of non-optimal mark-ups in French sectors is associated with a 0.4% loss in aggregate average annual labor productivity growth during the period (1.86%). Hence, long-term productivity growth could have reached 2.25% if mark-ups had been at their optimal level. There is a strong significant positive correlation between the optimal mark-up and the rate of Hicks-neutral technical progress in each sector. This finding implies that sectors with high technical progress, as information technologies sectors, require higher mark-ups to maximize their rate of labor productivity growth. Overall, the aggregate economy would benefit from a decrease in the gap between non-optimal and optimal mark-ups, as such an alignment would foster productivity growth.

Keywords: technical progress, productivity growth, mark-up

JEL Classification: O11, O31, O47, L16

Suggested Citation

Jeanjean, François and Ciriani, Stephane, Competition, Technological Change and Productivity Gains: The Contribution of Information Technologies (June 27, 2019). TPRC47: The 47th Research Conference on Communication, Information and Internet Policy 2019, Available at SSRN: https://ssrn.com/abstract=3410912 or http://dx.doi.org/10.2139/ssrn.3410912

François Jeanjean (Contact Author)

Orange ( email )

11 Quaoi du président Roosevelt
Issy les moulineaux, 92130
France

Stephane Ciriani

Orange ( email )

78, rue Olivier de Serres
Paris Cedex 15, 75505
France

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