Do Product Market Regulations in Upstream Sectors Curb Productivity Growth? Panel Data Evidence For OECD Countries

Abstract

Based on an endogenous growth model, we show that intermediate goods markets imperfections can curb incentives to improve productivity downstream. We confirm such prediction by estimating a model of multifactor productivity growth in which the effects of upstream competition vary with distance to frontier on a panel of 15 OECD countries and 20 sectors over 1985-2007. Competitive pressures are proxied with sectoral product market regulation data. We find evidence that anticompetitive upstream regulations have curbed MFP growth over the past 15 years, more strongly so for observations that are close to the productivity frontier.

Labor Market Policies and IMF Advice in Advanced Economies during the Great Recession

“…de Mooij and Keen stress that implementation of a fiscal devaluation requires many detailed choices that can "powerfully modify the impact of the tax shift" and hence a solution "which looks easy on paper" can be risky if not properly implemented. 34 Using data for a panel of OECD countries and sectors over the 1984 to 2007 period, Bourlès et al (2010) find that stringent product market regulations reduce total factor productivity in downstream industries. They estimate that aligning such regulations in upstream industries to best-practice levels would raise total factor productivity by ½ to 3½ percent over the next 5 years, and by 1½ to 10 percent over the next 10 years depending on the countries considered.…”

Competition in Services and Efficiency of Manufacturing Firms: Does 'Liberalization' Matter?

“…Markup measures a firm's market power, that is, the firm's capacity to charge higher prices for a given demand. In an imperfectcompetition framework, a firm sets a price above its marginal cost 11 . The DLW methodology is based on a cost minimisation problem for variable inputs without adjustment costs (materials), and markup is defined as the ratio of price to marginal cost (p/c).…”

Regulation, trade and economic growth

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