Regulation, Productivity and Growth: OECD Evidence

By G. Nicoletti, S. Scarpetta. 2003

1,148 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/ea5c1b5e50cf00696bc7faaab27ec31a85ac13a1

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Citations in the corpus

On the Welfare Effects and Political Economy of Competition-Enhancing Policies (2004, background): “For example, in a recent study using industry-level panel data for nineteen OECD countries, Nicoletti and Scarpetta (2003) show that increased product and labour market competition has positive and large effects on multi-factor productivity.”
Service regulation and growth: evidence from OECD countries (2011, background): “In columns 1 and 2 of Table 7 we accounted for countrylevel measures of employment protection and administrative (red-tape) barriers to entrepreneurships (Djankov et al., 2002; Nicoletti and Scarpetta, 2003; Bassanini et al. 2009).”
The productivity of trust (2015, neutral): “A related candidate is the quality of regulatory activity, which could likewise affect total factor productivity negatively (Nicoletti and Scarpetta, 2003.”
The Role of Labor Market Changes in the Slowdown of European Productivity Growth (2012, neutral): “Our results are somewhat in tension with those found by Nicoletti and Scarpetta (2003) and Allard and Lindert (2006).”
Entry costs and cross-country differences in productivity and output (2008, background): “"expropriation risk" constructed by the Political Risk Services (1999). It measures the risk of expropriation of private foreign investment by the government.”
Privatization and the Decline of Labour's Share: International Evidence from Network Industries (2012, positive): “DATA Data Sources We obtained our data on public ownership (PO) and barriers to entry (BTE) from the OECD’s regulation database (see Data Appendix A and Nicoletti and Scarpetta, 2000, 2003a,b)14.”
Federal regulation and aggregate economic growth (2013, neutral): “…the differences between our measure and its predecessors is in the Appendix.3 3 The predecessors are Nicoletti et al. (2000, 2001), Bassanini and Ernst (2002), Djankov et al. (2002, 2006), Nicoletti and Scarpetta (2003), Loayza et al. (2004, 2005), Alesina et al. (2003) and Kaufman et al. (2003).”
Market Services Productivity Across Europe and the US (2007, neutral): “22 See e.g. Brynjolfsson and Hitt (2003) for a firm-level study and Stiroh (2002) and Basu, Fernald, Oulton and Srinivasan (2004) for industry-level studies.”
The Effects of Labor and Product Market Reforms: The Role of Macroeconomic Conditions and Policies (2018, neutral): “…and others 2009; Alesina and others 2005; Barone and Cingano 2011; Bassanini and Duval 2009; Bassanini and others 2009; Blanchard and Wolfers 2000; Bouis and Duval 2011; Bourlès and others 2013; Fiori and others 2012; Inklaar and others 2008; Nickell and others 2005; Nicoletti and Scarpetta 2003).”
Do Product Market Regulations in Upstream Sectors Curb Productivity Growth? Panel Data Evidence For OECD Countries (2013, positive): “It has been used extensively in recent empirical research on the determinants of productivity growth at both the firm level (Aghion et al., 2005) and industry level (Nicoletti & Scarpetta, 2003; Griffith et al., 2004, 2010; Conway et al., 2006).”
Workplace Training in Europe (2005, positive): “…Figure I3 shows that there is a negative correlation between an index of stringency of anti-competitive product market regulation – due to Nicoletti and Scarpetta, 2003: training participation is low in Southern European countries, which invest less in R&D and have more regulated…”