Firm Level Productivity under Imperfect Competition in Output and Labor Markets

This article examines the role of the interaction between product market and labor market imperfections in determining total factor productivity growth (TFPG). Embedding Dobbelaere and Mairesse’s (2009) generalization of Hall’s (1990) approach, allowing for the possibility that wages are determined according to an efficient bargaining process between employers and employees, we correct estimated TFPG for possible biases arising from labor market imperfections. Our analysis contributes to the literature in a number of ways. First, we propose a new empirical measure of TFPG which takes into account possible biases coming from imperfect competition on both labor and output markets, whereas Dobbelaere and Mairesse (2009) focus on the decomposition of the Solow residual. Second, in contrast to most of the literature following Hall’s approach, we estimate market power including the user cost of capital stock. Third, we measure the sensitivity of TFPG to an alternative specification of competition based on relative profits. Using a large Dutch firm-level panel database over the period 1989-2005, we find that workers’ unions power, and in general rigidities of the labor market, affect firms’ marginal cost, and, consequently, the markups. Moreover, taking into account variable returns to scale and imperfect competition in the output market translate into increased TFPG, while accounting for labor market bargaining power leads to lower TFPG. Next, the investigation of our empirical relationship between the price-cost margin and an alternative specification of imperfect competition of the output market (profit elasticity) as a sensitivity analysis of the TFPG shows that adding more structure to the competition measure does not affect the level of productivity change.

Environmental policy and trade of manufacturing goods in Central and Eastern Enlargement of the European Union

We empirically investigate the link between environmental policy and trade with particular reference to the Single market and enlargement. We incorporate the methodology of endogenous protection, and question whether countries may wish to weaken their environmental policies as a response to more trade integration; in particular, we look at the impact of harmonization of product regulations and the level of imports. The empirical answer suggests that indeed (1) harmonization of product regulations lead to more trade; (2) domestic environmental regulations have a larger negative effect on trade when they are treated as endogenous; and (3) EU countries relax domestic environmental regulations due to the harmonization of regulations while those acceding countries that have been more advanced in joining the EU (Central Eastern European countries) set more stringent environmental regulations

Adjustment to globalization: A Study of the Footwear Industry in Europe

In this study of the footwear sector we seek to assess how producers in different EU countries have adjusted to increased competition from low-wage countries. There are a number of features of the performance of the sector in Europe that cast doubt over the applicability of the standard trade model, which has typically been used to assess the impact of globalisation. These characteristics also undermine a number of common perceptions regarding low-skilled labour intensive industries. Firstly, the trade data clearly demonstrate that as import penetration has increased so have export to output ratios. This suggests that adjustment to more intense import competition could entail the movement of resources into the production of higher quality differentiated fashion shoes and not just the movement of resources to other sectors. Secondly, the group of production or unskilled workers in footwear is far from homogeneous, as is often assumed in discussions of the impact of globalisation. Thirdly, for footwear it is apparent that technological change has not been pervasive. Information regarding two new technologies shows widely varying rates of application across countries. Finally, some EU countries have been able to maintain employment and output in footwear whilst in other countries production has declined dramatically. This suggests that a variety of responses to globalisation are available to firms in OECD countries, including outsourcing and overseas investment, quality upgrading and increased flexibility in the context of industrial districts