Regulation, Technological Change and Economic Outcomes: Evidence From Advanced, Emerging and Developing Countries

Paper Session

Saturday, Jan. 7, 2017 2:30 PM – 4:30 PM

Sheraton Grand Chicago, Michigan AB
Hosted By: Association for Comparative Economic Studies
  • Chair: Catherine L. Mann, OECD

Product Market Deregulation and Growth: New Country-Industry-Level Evidence

Romain Bouis
,
International Monetary Fund
Romain Duval
,
International Monetary Fund
Johannes Eugster
,
International Monetary Fund

Abstract

The paper investigates the economic effects of major product market reforms in some of the historically most protected non-manufacturing industries. It relies on a unique mapping between new annual data on reform shocks and sector-level outcomes for five network industries (electricity and gas, land transport, air transport, postal services, and telecommunications) in twenty-six countries spanning over three decades. The use of a three-dimensional panel and careful instrumentation of reform shocks using external instruments enables us to control for economy-wide macroeconomic shocks and address possible sources of omitted variable bias more broadly. Using a local projection method, we find that major reductions in barriers to entry yield large increases in output and labor productivity over a five-year horizon, concomitant with a relative price decline. By contrast, there is only a weak positive effect on sectoral employment, and investment is essentially unaffected, suggesting that output gains from reform primarily reflect higher total factor productivity. It takes some time for these gains to materialize: effects become statistically significant two to three years after the reform, as prices start dropping, and productivity and output increase significantly. However, there is no evidence of any negative short-term cost from reform, including under weak macroeconomic conditions. These findings provide a clear case for intensifying product market reform efforts in advanced economies at the current juncture of weak growth.

Labor Regulation and Capital Intensity

Gilbert Cette
,
Bank of France and Aix-Marseille University
Jimmy Lopez
,
Bank of France and University of Burgundy
Jacques Mairesse
,
CREST-ENSAE, Maastricht University, Bank of France and NBER

Abstract

This study proposes some evaluations of the effects of employment protection legislation (EPL) on capital intensity. Estimations of a regression equation on an industry*country panel, with controls for country*industry and country*year fixed effects, show that i) capital to labor ratio increases with EPL; ii) R&D capital to labor ratio decreases with EPL; iii) the share of high skilled workers in total employment increases with EPL. These results suggest that an EPL increase would be considered by firms as a labor cost one, with a capital to labor substitution impact in favour of non-sophisticated technologies and would be particularly detrimental for unskilled workers. And, on the contrary, structural reforms decreasing EPL could have a favourable impact on R&D investment and would be helpful for unskilled employment.

A New Look at Prices of Personal Computers: Desktops, Laptops, and Tablets

David M. Byrne
,
Federal Reserve Board
Stephen D. Oliner
,
American Enterprise Institute and University of California-Los Angeles
Daniel E. Sichel
,
Wellesley College and NBER

Abstract

Official price data suggest a dramatic slowing in rates of price decline for high-tech products. However, a series of recent papers have raised questions about these price trends. To sort out these issues for personal computers, we develop new hedonic indexes for desktops, laptops, and tablets, evaluating a wide range of alternative indexes. We also investigate whether including measures of a device’s actual performance based on benchmark tests (in addition to technical characteristics of the device) is important for personal computers. Our results indicate that prices for desktop computers have been falling quite slowly since 2010 and more slowly than in earlier years, confirming that broad pattern evident in official data. Our results for tablets (which are among the first hedonic indexes for these devices) indicate that prices of tablets have been falling more rapidly than those of desktops since 2010. The inclusion of benchmark performance measure is important for desktops, less so for tablets. [Results for laptops in next version of paper.]

Regulation, Institutions and Economic Growth in Advanced, Emerging and Developing Countries

Balazs Egert
,
OECD
Peter Gal
,
OECD

Abstract

This paper uses the OECD’s newly assembled Structural Policy Indicators Database for Economic Research (SPIDER) to gauge on the impact of regulation and institutions on economic growth. The indicators collected in SPIDER comprise data with long-time series covering OECD countries, data covering a larger set of countries for a varying number of years, and a set of time invariant indicators. The paper therefore looks at three types of growth regressions: i.) growth regressions using annual data for a relatively small number of countries (Arnold et al., 2007); ii.) growth regressions using multi-year averages for a large number of countries such as in Barro (2015), who uses data for 89 countries at non-overlapping five-year averages; and iii.) growth regressions based on a large pure cross-sectional data (e.g. Sala-i-Martin et al. 2004). Preliminary results suggest that in the growth regressions à la Arnold et al. (2007), some policy variables (e.g. Employment Protection Legislation) have a strong relationship with economic growth. Many other policy variables, including product market regulation (ETCR) are mostly non-significant. Barro regressions show that the variable capturing the legal system and property rights has a strong positive relation to growth, across various specifications, and that slow insolvency procedures are associated with low growth. Results of pure cross-country regressions à la Sala-i-Martin shed light on the robustness public education spending as a share of GDP and real exchange rate distortions. This framework could be easily beefed up with a number of other structural policy variables but there is a trade-off: the sample over which the averages are calculated would be reduced to a large degree. The regression results indicate that result change depending on the country coverage of the data (OECD vs. worldwide) and whether the within or the between variation of the data is exploited to identify policy impacts.
Discussant(s)
Iika Korhonen
,
Bank of Finland
Ali M. Kutan
,
Southern Illinois University-Edwardsville
Koen Schoors
,
Ghent University
Jan Svejnar
,
Columbia University
JEL Classifications
  • O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights