Product Market Reform and Innovation in the EU

Griffith, Rachel; Harrison, Rupert; Simpson, Helen

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Product Market Reform and Innovation in the EU

CEPR Discussion Paper No. 5849

32 Pages Posted: 16 Nov 2006

See all articles by Rachel Griffith

Rachel Griffith

Institute for Fiscal Studies (IFS); University of Manchester; Centre for Economic Policy Research (CEPR)

Helen Simpson

CMPO; Institute for Fiscal Studies (IFS)

Date Written: September 2006

Abstract

European Union countries have implemented widespread reforms to product markets in order to stimulate competition, innovation and economic growth. We provide empirical evidence that the reforms carried out under the EU Single Market Programme (SMP) were associated with increased product market competition, as measured by a reduction in average profitability, and with a subsequent increase in innovation intensity and productivity growth for manufacturing sectors. In our analysis we exploit exogenous variation in the expected impact of the SMP across countries and industries to identify the effects of reforms on average profitability, and the effects of profitability on innovation and productivity growth.

Keywords: Competition, innovation, productivity growth

JEL Classification: L1, O31, O47

Suggested Citation: Suggested Citation

Griffith, Rachel and Harrison, Rupert and Simpson, Helen, Product Market Reform and Innovation in the EU (September 2006). CEPR Discussion Paper No. 5849, Available at SSRN: https://ssrn.com/abstract=945439