Labour Market Regulations and Capital Intensity

Cette, Gilbert; Lopez, Jimmy; Mairesse, Jacques

doi:10.1093/oso/9780198821878.003.0009

Cited by 11 publications

(13 citation statements)

References 8 publications

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“…The fact that, in the case of highly-skilled workers, there is a significant impact on hours worked per output unit (column 4), even with no significant impact on workers' rent per hour (column 1) could correspond to the indirect labor cost effect of a change in EPL. These results are consistent with those of Cette, Lopez and Mairesse (2016b). Taken together, the estimation results in Table 2 and Table 1 column (5) indicate that EPL greatly reduces workers' share of rent for low-skilled workers, whereas it has a tiny impact on this share for medium-and highlyskilled workers.…”

Section: Linkages With the Oecd Indicators: Estimation Resultssupporting

confidence: 87%

“…Table D1, column (6), also shows the effects of regulations on capital intensity: the NMR -State and EPL -Impact variables affect capital intensity, but not NMR -Entry. This last result may be explained by the use of an aggregate capital stock, without taking into account capital composition, but such a breakdown would be beyond the scope of this paper (see Cette, Lopez and Mairesse, 2016b, for the importance of capital composition in the analysis of EPL effects). Most importantly, we observe that the effects of regulations on the mark-up rate, workers' share of rent and its components are robust to the inclusion of capital intensity among the control variables.…”

Section: Chart A5: Country Sample Average Tfp Relative To Us Tfpmentioning

confidence: 97%

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Rent Creation and Sharing: New Measures and Impacts on TFP

2018

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This analysis proposes new measures of rent creation or (notional) markup and workers' share of rents on crosscountry industry panel data. While the usual measures of markup rate implicitly assume perfect labor markets, our approach relaxes this assumption, and takes into account that part of firms' rent created in an industry is shared with workers to an extent which can vary with their skills. Our results are based on a crosscountry industry panel covering 14 OECD countries and 19 industries over the 1985-2005 period. In a first part of our analysis we draw on OECD indicators of product and labor market (anticompetitive) regulations to test how they are related to our new measures of markup and rent-sharing. We find that anti-competitive Non-Manufacturing Regulations (NMR) affect markup rates positively, and hence firms' rent creation and workers' share of rent, whereas Employment Protection Legislation (EPL) has no impact on rent creation, but boosts workers' wages per hour. However, we observe that these wage increases are offset by a negative impact from EPL on hours worked per output unit, leading to a non-significant impact of EPL on workers' share of rents. The effects of EPL for low-skilled workers appear to be more pronounced than those for medium-skilled workers, both being much greater than for highlyskilled workers. In the second part of our analysis, we estimate the impacts of our new measures on Total Factor Productivity (TFP) in the framework of a straightforward regression model. We use the OECD regulations indicators as relevant instrument to take care of endogeneity and to make sure that the resulting estimates assess the proper regulation impacts of rent creation and sharing without being biased by other confounding effects. We find that less competition in the product and labor markets as assessed by our measures of markup and workers' share of rents have both substantial negative impacts on TFP.

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Section: Linkages With the Oecd Indicators: Estimation Resultssupporting

confidence: 87%

Section: Chart A5: Country Sample Average Tfp Relative To Us Tfpmentioning

confidence: 97%

Rent Creation and Sharing: New Measures and Impacts on TFP

2018

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“…By contrast, focusing only on Italian firms, Cingano et al (2015) show that the introduction of unjust-dismissal costs raises the capital-to-labour ratio in firms with less than 15 employees, compared to larger firms. Finally, according to Cette et al (2016), at the sector level 5 , more stringent EPL has a positive effect on non-ICT capital, a nonsignificant effect on ICT capital and impacts negatively R&D capital…”

Section: Labour Market Regulationmentioning

confidence: 98%

Regulation, Institutions and Aggregate Investment: New Evidence from OECD Countries

Égert

2018

Open Econ Rev

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Using a panel of 32 OECD countries from 1985 to 2013, we show that more stringent product and labour market regulations are associated with less investment (lower capital stock). The paper also sheds light on the existence of non-linear effects of product and labour market regulation on the capital stock. Several alternative testing methods show that the negative influence of product and labour market regulation is considerably stronger at higher levels. The paper uncovers important policy interactions between product and labour market policies. Higher levels of product market regulations (covering state control, barriers to entrepreneurship and barriers to trade and investment) tend to amplify the negative relationships between product and labour market regulations and the capital stock. Equally important is the finding that the rule of law and the quality of (legal) institutions alters the overall impact of regulations on capital deepening: better institutions reduce the negative effect of more stringent product and labour market regulations on the capital stock, possibly through the reduction of uncertainty as regards the protection of property rights. Terms of use: Documents inJEL-Codes: E240, C130, C230, C510, L430, L510.

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“…Franklin et al (2015) use pre-crisis lending relationships to establish that contractions in lending reduce labor productivity, wages and capital intensity of firms in the United Kingdom. Cette et al (2016) use a cross-country sample of 14 OECD countries to show that stricter employment protection distorts firms' capital intensity, as firms perceive an increase in labor protection like a tax on labor costs. They substitute capital with labor.…”

Section: Literature Reviewmentioning

confidence: 99%

Credit-Supply Shocks and Firm Productivity in Italy

Dörr

Raissi²,

Weber³

2017

IMF Working Papers

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The Italian economy has been struggling with low productivity growth and bank balance sheet strains. This paper examines the implications for firm productivity of adverse shocks to bank lending in Italy, using a novel identification scheme and loan-level data on syndicated lending. We exploit the heterogeneous loan exposure of Italian banks to foreign borrowers in distress, and find that a negative shock to bank credit supply reduces firms' loan growth, investment, capital-to-labor ratio, and productivity. The transmission from changes in credit supply to firm productivity relates to labor market rigidities, which delay or distort the adjustment of firms' desired labor and capital allocations, and thereby reduce firms' productivity. Effects are stronger for firms with higher capital intensity and external financial dependence.

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Labour Market Regulations and Capital Intensity

Cited by 11 publications

References 8 publications

Rent Creation and Sharing: New Measures and Impacts on TFP

Rent Creation and Sharing: New Measures and Impacts on TFP

Regulation, Institutions and Aggregate Investment: New Evidence from OECD Countries

Credit-Supply Shocks and Firm Productivity in Italy

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