Gilbert Cette

Do Product Market Regulations in Upstream Sectors Curb Productivity Growth? Panel Data Evidence for OECD Countries

We identify the impact of intermediate goods markets imperfections on productivity downstream. Our empirical specification is based on a model of multifactor productivity (MFP) growth in which the effects of upstream competition can vary with distance to frontier. This model is estimated on a panel of fifteen OECD countries and twenty industries over 1985 to 2007. Competitive pressures are proxied with industry product market regulation data. We find evidence that anticompetitive upstream regulations have significantly curbed MFP growth over the past fifteen years, and more strongly so for observations that are close to the productivity frontier.

ICT Diffusion and Potential Output Growth

The sustained increase in productivity gains from the spread of ICTs may increase potential output growth in the medium to long term via capital deepening effects and total factor productivity (TFP) gains, and in the short to medium term via the lagged adjustment of wages to productivity gains. The orders of magnitude resulting from the assessment data presented indicate that the medium to long-term effect could be significant. However, there does not appear to be any empirical evidence to support the existence of the temporary short to medium-term effect.

ICT demand behaviour: an international comparison

This study aims to provide some empirical explanations for the gaps in information and communication technologies (ICT) diffusion between industrialized countries and especially between European countries and the USA. National macro-economic panel data are mobilized for 11 OECD countries over the 1981–2005 period. The analysis is based on factor demand estimates. It provides some original results: (i) the impact on ICT diffusion is positive for the level of education and negative for market rigidities, and both increased over time (in absolute terms) until mid-1990s; (ii) in each country, the price-elasticity of demand for ICT decreased (in absolute terms) over time, from 2 at the beginning of the 1980s to 1 in the middle of the 2000s.

A comparison of structural productivity levels in the major industrialised countries

Hourly labour productivity, along with average hours worked, the employment rate and the working-age population as a share of the total population, is one of the accounting aggregates that determine per capita GDP. Yet according to many analyses, hourly labour productivity in several European countries is much the same as or even higher than in the United States, while per capita GDP is markedly lower (see Cette 2004, 2005 for a summary of this work).

Capital Utilisation and Retirement

This empirical analysis aims at assessing the effect of the economic climate and the intensity of capital utilisation on companies’ capital retirement behaviour. It is conducted using individual company data, as well as original data on the degree of utilisation of production factors. The sample includes 6,998 observations over the period 1996-2008. This database is, to our knowledge, unique for the empirical analysis of the intensity of capital utilisation on firms’ capital retirement behaviour. We adjust for endogeneity biases by means of instrumental variables. The main results obtained from the estimation of capital retirement models may be summarised as follows: i) The retirement rate decreases with the variations in cyclical pressures measured by the changes in output and the workweek of capital; this relation corresponds to a countercyclical decelerator effect on capital retirement; ii) The capital retirement rate increases with the structural intensity of capital utilisation; this effect, which corresponds to a wear and tear one, is nevertheless small compared to the decelerator one; iii) The profit rate does not have a significant impact on the retirement rate. Compared with the existing literature, here mainly Mairesse and Dormont (1985), the contribution of these results is to show, through the use of unique survey data, that the effect of the intensity of capital utilisation on capital retirement is structurally positive, via a wear and tear effect, and cyclically negative, via a decelerator effect which completes that already taken into account via the effect of changes in value added.

Productivity Growth and Levels in France, Japan, the United Kingdom and the United States in the Twentieth Century

This study compares labor and total factor productivity (TFP) in France, Japan, the United Kingdom and the United States in the very long (since 1890) and medium (since 1980) runs. During the past century, the United States has overtaken the United Kingdom and become the leading world economy. During the past 25 years, the four countries have also experienced contrasting advances in productivity, in particular as a result of unequal investment in information and communication technology (ICT). The past 120 years have been characterized by: (i) rapid economic growth and large productivity gains in all four countries; (ii) a long decline in productivity in the United Kingdom relative to the United States, and to a lesser extent also relative to France and Japan, a relative decline that was interrupted by the second world war (WW2); (iii) the remarkable catching-up to the United States by France and Japan after WW2, interrupted in the case of Japan during the 1990s. Capital deepening (at least to the extent this can be measured) accounts for a large share of the variations in performance; increasingly during the past 25 years, this has meant ICT capital deepening. However, the capital contribution to growth varies considerably over time and across the four countries, and it is always less important, except in Japan, than the contribution of the various other factors underlying TFP growth, such as, among others, labor skills, technical and organizational changes and knowledge spillovers. Most recently (in 2006), before the current financial world crisis, hourly labor productivity levels were slightly higher in France than in the United States, and noticeably lower in the United Kingdom (by roughly 10%) and even lower in Japan (30%), while TFP levels are very close in France, the United Kingdom and the United States, but much lower (40%) in Japan.

Production Factor Returns: The Role of Factor Utilization

Short-term increasing returns to production factors are usually found in empirical studies. We argue they can be due to omitted variables, particularly the intensity of factor utilisation. Thanks to original French firm-level data (1992-2008), we show how increasing returns to scale disappear when working time, capacity utilisation rate and mainly capital operating time are introduced in the production function.

Does ICT Remain a Powerful Engine of Growth

ICT productive performances have slowed down since the beginning of the 2000s, before the current crisis. This diagnosis could be due, at least partly, to some statistical mis-measurements of ICT improvements. Nevertheless, improvements in ICT performances will probably be positively impacted, in some years, by large technological developments as for example the productive use, in computers, of the 3D chip. The lag of ICT diffusion in non-US developed countries, mainly Europe and Japan, compare to the US, is explained by institutional aspects: a lower education level, on average, of the working-age population and more regulations on labour and product markets. By implementing structural reforms, these countries could benefit from a productivity acceleration linked to a catch-up of the US ICT diffusion level. And they could benefit, without any delay with the US, from the possible ICT productivity growth second wave.

Investment in ICTs: an empirical analysis

This paper addresses the question of whether differences in the price elasticity of demand for Information and Communication Technologies (ICTs) could explain why Europe lags behind the USA in terms of ICT diffusion. Annual macroeconomic data covering the period 1975–2001 is used and five countries considered: France, Germany, the Netherlands, the UK and the USA. Europes lag in ICT diffusion does not appear to be linked to cross-country differences in the price elasticity of demand for ICT products. The results suggest that at least part of the gap in ICT diffusion should be ascribed to more structural cross-country differences. The estimated value of the price-elasticity of computer hardware and software is generally lower than −1 which, given the decline in the relative price of these products, explains the increase in their share of investment expenditure and GDP. This situation is characteristic of a diffusion stage and is necessarily temporary.

Capital Operating Time: Measurement Issues

As economists and policy makers have come to recognise the importance of capital utilisation, an increasing number of alternative measures have emerged in the literature. The growth of a range of alternatives in part reflects the fact that the measures are far from perfect and that researchers have been forced to be innovative in their attempts to throw light on this issue. In addition, however, the alternatives also reflect the different dimensions of utilisation and it is not surprising therefore that the alternative measures often give somewhat different results. The present paper focuses primarily on capital utilisation and only touches on labour and overall capacity utilisation in passing. The indicators of capital utilisation reviewed below include direct survey, shiftwork-based, energy-based and a variety of other more ad hoc measures.