The Role of Policy and Institutions for Productivity and Firm Dynamics: Evidence from Micro and Industry Data

Abstract

Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format ECO/WKP(2002)15 Unclassified English text only ECO/WKP(2002)15 2 ABSTRACT/RESUMÉThe role of policy and institutions for productivity and firm dynamics: evidence from micro and industry data This paper presents empirical evidence on the role that policy and institutional settings in both product and labour market play for productivity and firm dynamics. It exploits a new firm-level database for ten OECD countries and industry-level data for a broader set of countries, together with a set of indicators of regulation and institutional settings in product and labour markets. Aggregate productivity patterns are largely the result of within-firm performance. But, the contribution from firm dynamic processes should not be overlooked, most notably in high-tech industries where new firms tend to play an important role. Industry productivity performance is negatively affected by strict product market regulations, especially if there is a significant technology gap with the technology leader. Likewise, high hiring and firing costs seem to hinder productivity, especially when these costs are not offset by lower wages and/or more internal training. Moreover, burdensome regulations on entrepreneurial activity as well as high costs of adjusting the workforce seem to negatively affect the entry of new small firms. Our data also suggest different features of entrant and exiting firms across countries. In particular, in the U.S., entrant firms tend to be smaller and with lower than average productivity, but those which survive the initial years expand rapidly. By contrast, firms tend to enter with a relatively higher size in Europe but do not expand significantly subsequently.

Employment Protection and Gross Job Flows: A Differences-in-Differences Approach

“…Consistent with this notion, they find evidence that, while annual job flows are quite similar in the relatively flexible United States and in relatively rigid Portugal, quarterly job flows are much smaller in the latter. 2 See, for instance, Foster, Haltiwanger and Krizan (1997) or Scarpetta, Hemmings, Tressel et al (2002). 3 Bertola and Rogerson, (1997); Alogoskoufis, Bean, Bertola et al (1995); OECD (1996 and; Davis and Haltiwanger (1999).…”

Defensive strategies in quality ladders

“…Finally, in order to test in further detail our theoretical setting we use data from …rm demography provided by the OECD …rm-level project (Scarpetta et al 2002). We regress the entry rate on regulation and plausible controls such as the level of capital stock to proxy for sunk …xed costs and the level of production in the industry as a proxy of market size (Table 13, appendix).…”

Entrepreneurship, structural change, and economic growth

“…This view is challenged by other authors. Scarpetta et al (2002) find that a large share of the increase in labor productivity is caused by internal restructuring and that for TFP growth, internal restructuring has only a slightly smaller impact than external restructuring.…”