Regulation, Productivity, and Growth : OECD Evidence
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 pri...
| Main Authors: | , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/01/2117755/regulation-productivity-growth-oecd-evidence http://hdl.handle.net/10986/19175 |
| Summary: | 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. |
|---|