1887

OECD Economics Department Working Papers

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.

English, French

Import Competition, Domestic Regulation and Firm-Level Productivity Growth in the OECD

This paper examines how import penetration affects firms' productivity growth taking into account the heterogeneity in firms' distance to the efficiency frontier and country differences in product market regulation. Using firm-level data for a large number of OECD countries, the analysis reveals non-linear effects of both sectoral import penetration and de jure product market regulation measures depending on firms' positions along the global distribution of productivity levels. The heterogeneous effects of international competition and domestic product market regulation on firm-level productivity growth are consistent with a neo-Schumpeterian view of trade and regulation. Close to the technology frontier, import competition has a strongly positive effect on firm-level productivity growth, with stringent domestic regulation reducing this effect substantially. However, far from the frontier, neither import competition nor its interaction with domestic regulation has a statistically significant effect on firm-level productivity growth. The results suggest that insufficient attention has been made in the trade literature to within-firm productivity growth.

English

Keywords: behind-the-border regulatory barriers, product market regulation, international trade, Firm productivity growth, import competition
JEL: L2: Industrial Organization / Firm Objectives, Organization, and Behavior; O1: Economic Development, Innovation, Technological Change, and Growth / Economic Development; L5: Industrial Organization / Regulation and Industrial Policy; K2: Law and Economics / Regulation and Business Law; F1: International Economics / Trade
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