Service Deregulation, Competition and the Performance of French and Italian Firms

Abstract

We use firm-level data for France and Italy to explore the impact of service regulation reform implemented in the two countries on the mark-up and eventually on the performance of firms between the second half of the 1990s and 2007. We find that the relation between entry barriers and productivity is negative and is crucially intermediated through the firm's mark up. If both countries adopted OECD's best practices in terms of entry barriers, their TFP level would increase by 3% for Italy and 3.5% for France.JEL Classification: D24, K20, L51, O40, O57

The Multiprod project

“…One key determinant that can explain cross-country differences in resource allocation is regulation. Some policies which have been found to influence reallocation include entry regulation (Daveri et al 2016), employment production legislation (Martin and Scarpetta 2012), liberalisation and competition (Melitz and Ottaviano 2008) and so on. Alternatively, differences in reallocation may also be driven by an exogenous shock such as a recession, which may either enhance allocative efficiency through a cleansing effect (Davis et al 2012) or scar the economy, thereby hindering an efficient allocation of resources (Barlevy 2002 andOuyang 2009).…”