Working Paper: NBER ID: w20563
Authors: Gilbert Cette; Jimmy Lopez; Jacques Mairesse
Abstract: This study is an attempt to evaluate the effects of product and labour market regulations on industry productivity through their various impacts on changes in production prices and wages. In a first stage, the estimation of a regression equation on an industry*country panel, with controls for country*industry and country*year fixed effects, show that multi-factor productivity is negatively and significantly influenced by both indicators of industrial prices from same industry and weighted average of industrial prices from other industries, and by indicators of country wages weighted by industry labour shares for low and high skilled workers. In a second stage, an economic policy simulation of the implications these results on the basis of their calibration by the OECD product and labour market anti-competitive regulation indicators suggests that nearly all countries could expect sizeable gains in multifactor productivity from deregulation reforms.
Keywords: Product Market Regulations; Labour Market Regulations; Productivity; Wages; Prices
JEL Codes: C23; L16; L50; O43; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| product market imperfections (D43) | higher production prices (L11) |
| higher production prices (L11) | lower multifactor productivity (MFP) (D24) |
| product market imperfections (D43) | lower multifactor productivity (MFP) (D24) |
| labour market regulations (J48) | higher wages (J39) |
| higher wages (J39) | lower multifactor productivity (MFP) (D24) |
| labour market regulations (J48) | lower multifactor productivity (MFP) (D24) |
| higher wages (J39) | reduced profits (D33) |
| reduced profits (D33) | lower multifactor productivity (MFP) (D24) |