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

Insolvency Regimes, Technology Diffusion and Productivity Growth

Evidence from Firms in OECD Countries

This paper explores the link between the design of insolvency regimes across countries and laggard firms’ multi-factor productivity (MFP) growth, using new OECD indicators of the design of insolvency regimes. Firm-level analysis shows that reforms to insolvency regimes that lower barriers to corporate restructuring are associated with higher MFP growth of laggard firms. These results are consistent with the idea that insolvency regimes that do not unduly inhibit corporate restructuring can incentivise experimentation and provide scope to reconfigure production and organisational structures in order to faciliate technological adoption. The results also highlight policy complementarities, with insolvency regimes that reduce the cost of entrepreneurial failure potentially enhancing the MFP gains from lowering administrative entry barriers in product markets. Finally, we find that reducing debt bias in corporate tax systems and well-developed venture capital markets are associated higher laggard firm MFP growth, suggesting that equity financing can also be an important driver of technological diffusion. These findings carry strong policy implications, in light of the fact that there is much scope to reform insolvency regimes in many OECD countries and given evidence that stalling technological diffusion has contributed to the aggregate productivity slowdown.

English

Keywords: technological diffusion, equity financing, laggard firms, insolvency, Productivity, venture capital
JEL: O16: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance; O40: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Economic Growth and Aggregate Productivity: General; O47: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence; K35: Law and Economics / Other Substantive Areas of Law / Personal Bankruptcy Law; G33: Financial Economics / Corporate Finance and Governance / Bankruptcy; Liquidation; G34: Financial Economics / Corporate Finance and Governance / Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance; D24: Microeconomics / Production and Organizations / Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity; O43: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Institutions and Growth
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