Working Paper: CEPR ID: DP3851
Authors: Alberto F. Alesina; Silvia Ardagna; Giorgio Nicoletti; Fabio Schiantarelli
Abstract: One commonly held view about the difference between continental European countries and other OECD economies, especially the United States, is that the heavy regulation of Europe reduces its growth. Using newly assembled data on regulation in several sectors of many OECD countries, we provide substantial and robust evidence that various measures of regulation in the product market, concerning in particular entry barriers, are negatively related to investment. The policy implication of our analysis is clear: regulatory reforms, especially those that liberalize entry, are very likely to spur investment.
Keywords: investment; regulation
JEL Codes: E22; E60; L50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| regulation (L51) | investment (G31) |
| deregulation (L51) | number of firms (L20) |
| number of firms (L20) | markup of prices over marginal costs (D40) |
| markup of prices over marginal costs (D40) | investment (G31) |
| regulatory burdens (L51) | firms' ability to adjust capital stock (D25) |
| firms' ability to adjust capital stock (D25) | investment (G31) |
| liberalization of entry (L59) | private investment (E22) |
| privatization (L33) | investment (G31) |
| regulatory reforms (G18) | investment (G31) |