Jimmy Lopez

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 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.

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.

Labour Market Regulations and Capital Intensity

On the basis of a country*industry unbalanced panel data sample for 14 OECD countries and 18 industries covering the years 1988 to 2007, this study proposes an econometric investigation of the effects of the OECD Employment Protection Legislation (EPL) indicator on capital intensity for four capital components, and on the share of employment for two skill components. Our results relying on a difference-in-difference approach are the following: i) positive and significant effects for non-ICT physical capital intensity and the share of high-skilled employment; ii) non-significant effects for ICT capital intensity; and (iii) negative and significant effects for R&D capital intensity and the share of low-skilled employment. These results suggest that firms consider that the strengthening of Employment Protection Legislation is equivalent to a rise in the cost of labor, resulting in capital-to-labor substitution in favor of non-ICT capital and working at the disadvantage of low-skill relatively to high-skill workers. They indicate to the contrary that structural reforms for more labor flexibility weakening this legislation could have a favorable impact on firms’ R&D investment and their hiring of low-skill workers.

Euro area structural convergence? A multi-criterion cluster analysis

This paper proposes a classification of the old member countries of the euro area in a structural data rich environment and run a convergence analysis using the same framework. First, we use a clustering approach and identify two structurally distinct clusters of countries that are not modified between 1999 and 2012: the South Countries Group (SCG) – composed of Greece, Italy, Portugal and Spain – and the Other Countries Group (OCG). Second, we propose a convergence metrics and reach three key findings: (i) increase over time of the between-clusters? dispersion; (ii) diverging demographics and innovation performance into the OCG, and (iii) an unfortunate convergence towards high labour market duality in the SCG.

Rent Creation and Sharing: New Measures and Impactson TFP

This analysis proposes new measures of rent creation or (notional) mark-up and workers’ share of rents on cross-country-industry panel data. While the usual measures of mark-up 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 cross-country-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 mark-up and rent-sharing. We find that anti-competitive Non-Manufacturing Regulations (NMR) affect mark-up 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 highly-skilled 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 mark-up and workers’ share of rents have both substantial negative impacts on TFP.

Modeling Heterogeneity in Country-Industry-Year Panel Data: Two Illustrative Econometric Analyses

The macroeconomic empirical literature based on three-dimensional country- industry-year panel data, such as the widely used OECD STAN and EUKLEMS databases, has become extremely abundant, providing more observations for studies previously investigated on two-dimensional country-year panels. However, a large part of this literature does not take advantage of the development of panel data methods to deal with heterogeneity and dynamic and non-stationarity issues. We explain in this chapter how one can put them into practice and circumvent the lack of variability left in the data once one controls for simple and two-way interacted fixed effects in these industry-country-year panels. We illustrate what to do in the context of two econometric analyses, in which we first try to estimate the productivity impacts of ICT and R&D, and second the productivity impacts of product market anticompetitive regulations.

Labour market regulations and capital labour substitution

On the basis of a country*industry unbalanced panel data sample for 14 OECD countries and 18 industries covering the years 1988 to 2007, this study proposes an econometric investigation of the effects of the OECD Employment Protection Legislation (EPL) indicator on four components of total capital and for two skill components of total labor. Relying on a difference-in-difference econometric approach, we find that an increase in EPL has (i) positive and significant effects on the non-ICT capital - labor ratio and the share of high-skill labor; (ii) non-significant effects on the ICT capital – labor ratio; (iii) negative and significant effects for R&D capital – labor ratio and the share of low-skilled labor. These results suggest that firms consider that the strengthening of Employment Protection Legislation is equivalent to a rise in the cost of labour, resulting in capital-to-labour substitution in favour of non-ICT capital and working at the disadvantage of low-skill relatively to high-skill workers. They indicate to the contrary that structural reforms for more labour flexibility weakening this legislation could have a favourable impact on firms’ R&D investment and their hiring of low-skill workers.