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.

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The Role of Policy and Institutions for Productivity and Firm Dynamics

Evidence from Micro and Industry Data

This paper presents empirical evidence on the role that policy and institutional settings in both product and labour market play for productivity and firm dynamics. It exploits a new firm-level database for ten OECD countries and industry-level data for a broader set of countries, together with a set of indicators of regulation and institutional settings in product and labour markets. Aggregate productivity patterns are largely the result of within-firm performance. But, the contribution from firm dynamic processes should not be overlooked, most notably in high-tech industries where new firms tend to play an important role. Industry productivity performance is negatively affected by strict product market regulations, especially if there is a significant technology gap with the technology leader. Likewise, high hiring and firing costs seem to hinder productivity, especially when these costs are not offset by lower wages and/or more internal training. Moreover, burdensome regulations ...


Keywords: micro and industry data, firm dynamics, productivity, regulation, institutions
JEL: O57: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Comparative Studies of Countries; L50: Industrial Organization / Regulation and Industrial Policy / Regulation and Industrial Policy: General; C33: Mathematical and Quantitative Methods / Multiple or Simultaneous Equation Models; Multiple Variables / Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models; O12: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Microeconomic Analyses of Economic Development
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