Upstream Product Market Regulations, ICT, R&D and Productivity

Abstract

ACL-2International audienceOur study investigates the importance of two main channels through which upstream anti-competitive sector regulations impact productivity growth: investments in R&D and in ICT, as opposed to alternative channels we cannot explicitly consider for lack of appropriate data such as improvements in skills, management and organization. We specify a three equations model: an extended production function relating total factor productivity to both R&D and ICT capital, and to upstream regulations, and two factor demand functions relating R&D and ICT capital to upstream regulations. We estimate these relations on an unbalanced panel of 15 OECD countries and 13 industries over the period 1987–2007. We find that the total impact of upstream regulations on total factor productivity is sizeable, a large part of which is transmitted through investments in R&D and ICT, mainly the former

The Effect of Foreign Entry Regulation on Downstream Productivity: Microeconomic Evidence from China*

“…Similar results are found by Bas and Causa (), who explore the effect of trade and product market policies in upstream sectors on downstream productivity in China, and by Cette et al . (), who focus on the role of R&D investment in driving the relationship between upstream competition and downstream performance. One common feature of these studies is that their regulation variable is based on the OECD indicators of anti‐competitive regulations on the product market, where six non‐manufacturing industries are included in Bourlés et al .…”

“…(2013) and Cette et al . () and only three industries are included in Bas and Causa (). This leaves scope for further exploration of the impact of upstream regulation on downstream performance by using our more comprehensive and highly disaggregated dataset on foreign entry regulation in China.…”

“…We use a unique matching approach to link the information on foreign entry regulation from the Catalogue with China's Input-Output Tables and the firm-level production data of more than 480,000 manufacturing firms. This novel and comprehensive dataset is superior to the commonly used OECD indicators of anti-competitive regulations on the product market, which cover a small number of broadly defined non-manufacturing industries (Bas and Causa, 2013;Bourlès et al, 2013;Cette et al, 2017).…”

“… See the cross‐country evidence on economic growth (Acemoglu et al ., ), the microeconomic evidence on industrial organization and international trade (Aghion et al ., ; Amiti and Khandelwal, ; Ding et al ., ), and the literature on the effects of anti‐competitive upstream regulations on the downstream performance (Bas and Causa, ; Bourlés et al ., 2013; Cette et al ., ). …”

Rent Creation and Rent Sharing: New Measures and Impacts on Total Factor Productivity

“…Bourlès et al (), among others, find evidence that the indirect impact of anticompetitive product market regulations on productivity is negative and stronger close to the technological frontier . Cette, Lopez, and Mairesse () also find a negative indirect impact, and conclude that a large part of this is transmitted through investment in R&D and, to a lesser extent, information and communication technology (ICT). A few studies find the opposite results.…”