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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.
Regulation and Economic Performance
Product Market Reforms and Productivity in the OECD
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- Giuseppe Nicoletti1, Stefano Scarpetta1
- Author Affiliations
- 1: OECD, France
- 22 Nov 2005
- Bibliographic information
This paper assesses the implications of past and ongoing reforms in OECD product markets for the labour productivity gap, a key component of cross-country differences in GDP per capita. After a brief review of the theoretical literature, we bring together the results obtained in some of our empirical work over the past few years, discussing econometric approaches and their drawbacks. We then use these results to gauge the likely effect of further reforms. We distinguish effects on capital deepening and technical progress by examining the impact of regulations on investment (domestic and foreign) and multi-factor productivity. We focus on the effects of policies aimed at strengthening private governance (e.g. through privatization) and opening up access to markets where competition is economically viable. The results suggest that pro-competitive reforms tend to increase both investment and multifactor productivity and, through both these channels, they can lead to higher growth in GDP per capita.
- investment, aggregate productivity and growth, panel data, regulation
- JEL Classification:
- C23: Mathematical and Quantitative Methods / Single Equation Models; Single Variables / Panel Data Models; Spatio-temporal Models
- E22: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Investment; Capital; Intangible Capital; Capacity
- F21: International Economics / International Factor Movements and International Business / International Investment; Long-Term Capital Movements
- L5: Industrial Organization / Regulation and Industrial Policy
- O4: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity