OECD Economics Department Working Papers

1815-1973 (online)
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.


Labour Market Institutions, Product Market Regulation, and Innovation

Cross-Country Evidence You or your institution have access to this content

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Andrea Bassanini1, Ekkehard Ernst
Author Affiliations
  • 1: OECD, France

Publication Date
16 Jan 2002
Bibliographic information

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In this paper we present comparative evidence from OECD countries concerning the impact of product and labour market regulations on innovation. While product and labour market policies usually aim at objectives other than innovation, they may have important consequences for the profitability of firms’ innovative strategies. Our regression analysis provides some cross-country evidence that enhancing competition in the product market -- while guaranteeing intellectual property rights -- seems to have a positive impact on the innovation performance of a country. Conversely, the relationship between innovation and job protection does not seem to be univocal. The sign and magnitude of the effect of the latter crucially depends on the systems of industrial relations and the specific characteristics of each industry. Indeed, the larger the scope for resorting to internal labour markets, the lower the adjustment costs imposed by labour market regulation. Moreover, in industries with a ...

technological specialisation, technological regimes, regulation, industrial relations, competence accumulation
JEL Classification:
  • J50: Labor and Demographic Economics / Labor–Management Relations, Trade Unions, and Collective Bargaining / General
  • O31: Economic Development, Technological Change, and Growth / Technological Change; Research and Development; Intellectual Property Rights / Innovation and Invention: Processes and Incentives
  • O33: Economic Development, Technological Change, and Growth / Technological Change; Research and Development; Intellectual Property Rights / Technological Change: Choices and Consequences; Diffusion Processes