Regulation, productivity, and growth : OECD evidence

The authors look at differences in the scope and depth of pro-competitive regulatory reforms and privatization policies as a possible source of cross-country dispersion in growth outcomes. They suggest that, despite extensive liberalization and privatization in the OECD area, the cross-country variation of regulatory settings has increased in recent years, lining up with the increasing dispersion in growth. The authors then investigate empirically the regulation-growth link using data that cover a large set of manufacturing and service industries in OECD countries over the past two decades and focusing on multifactor productivity (MFP), which plays a crucial role in GDP growth and accounts for a significant share of its cross-country variance. Regressing MFP on both economywide indicators of regulation and privatization and industry-level indicators of entry liberalization, the authors find evidence that reforms promoting private governance and competition (where these are viable) tend to boost productivity. In manufacturing the gains to be expected from lower entry barriers are greater the further a given country is from the technology leader. So, regulation limiting entry may hinder the adoption of existing technologies, possibly by reducing competitive pressures, technology spillovers, or the entry of new high technology firms. At the same time, both privatization and entry liberalization are estimated to have a positive impact on productivity in all sectors. These results offer an interpretation to the observed recent differences in growth patterns across OECD countries, in particular between large continental European economies and the United States. Strict product market regulations-and lack of regulatory reforms-are likely to underlie the relatively poorer productivity performance of some European countries, especially in those industries where Europe has accumulated a technology gap (such as information and communication technology-related industries). These results also offer useful insights for non-OECD countries. In particular, they point to the potential benefits of regulatory reforms and privatization, especially in those countries with large technology gaps and strict regulatory settings that curb incentives to adopt new technologies.Labor Policies,Public Health Promotion,Health Monitoring&Evaluation,Environmental Economics&Policies,Economic Theory&Research,Governance Indicators,Environmental Economics&Policies,Economic Theory&Research,Health Monitoring&Evaluation,Health Economics&Finance

Subjective and Objective Measures of the Extent of Governmental Regulations

In recent years, three different quantitative studies measuring the extent of regulation in OECD nations have appeared. One analysis is based on an extensive review and quantification of laws and regulations; the other two are based on opinion data of those familiar with these regulations. Despite their very different methodologies and coverage of particular types of governmental regulation, the results of the three studies are significantly correlated, even though they differ in detail. The advantages and disadvantages of each of the three approaches are discussed.Regulatory Reform, Other Topics

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

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.total factor productivity, firm-level data, product market regulation

Regulation and Investment

One commonly held view about the difference between continental European countries and other OECD economies, especially the United States, is that the heavy regulation of Europe reduces its growth. Using newly assembled data on regulation in several sectors of many OECD countries, we provide substantial and robust evidence that various measures of regulation in the product market, concerning in particular entry barriers, are negatively related to investment. The implications of our analysis are clear: regulatory reforms, especially those that liberalize entry, are very likely to spur investment.

Regulation, resource reallocation and productivity growth

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

Does anti-competitive regulation matter for productivity? Evidence from European firms

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

Regulation and Investment

We use newly assembled data on regulation in several sectors of many OECD countries to provide evidence that regulatory reform of product markets is associated with an increase in investment. A component of reform that plays a very important role is entry liberalization, but privatization also has a substantial effect on investment. Sensitivity analysis suggests that our results are robust.Economic

CONSUMPTION AND GOVERNMENT DEBT IN HIGH DEFICIT COUNTRIES: IS TAX-DISCOUNTING STABLE OVER TIME? THE CASE OF ITALY AND BELGIUM

fiscal policy ; consumption ; estimator ; economic models