Stefano Scarpetta

Regulation, Productivity and Growth: OECD Evidence

The authors look at differences in the scope and depth of pro-competitive regulatory reforms and privatization policies as a possible source of cross-country dispersion in growth outcomes. They suggest that, despite extensive liberalization and privatization in the OECD area, the cross-country variation of regulatory settings has increased in recent years, lining up with the increasing dispersion in growth. The authors then investigate empirically the regulation-growth link using data that cover a large set of manufacturing and service industries in OECD countries over the past two decades and focusing on multifactor productivity (MFP), which plays a crucial role in GDP growth and accounts for a significant share of its cross-country variance. Regressing MFP on both economywide indicators of regulation and privatization and industry-level indicators of entry liberalization, the authors find evidence that reforms promoting private governance and competition (where these are viable) tend to boost productivity. In manufacturing the gains to be expected from lower entry barriers are greater the further a given country is from the technology leader. So, regulation limiting entry may hinder the adoption of existing technologies, possibly by reducing competitive pressures, technology spillovers, or the entry of new high technology firms. At the same time, both privatization and entry liberalization are estimated to have a positive impact on productivity in all sectors. These results offer an interpretation to the observed recent differences in growth patterns across OECD countries, in particular between large continental European economies and the United States. Strict product market regulations-and lack of regulatory reforms-are likely to underlie the relatively poorer productivity performance of some European countries, especially in those industries where Europe has accumulated a technology gap (such as information and communication technology-related industries). These results also offer useful insights for non-OECD countries. In particular, they point to the potential benefits of regulatory reforms and privatization, especially in those countries with large technology gaps and strict regulatory settings that curb incentives to adopt new technologies.

The Retirement Decision in OECD Countries

This paper examines the main determinants of the decision to retire from the labour market in OECD countries, and in particular the role of social security systems in driving down the labour-force participation rate of older people in recent decades. It demonstrates that old-age pension systems in virtually all OECD countries in the mid-1990s made it financially unattractive to work after the age of 55, and the implicit tax on continued work has risen strongly since the 1960s in most countries. Financial disincentives to continued work have been amplified by various de facto early-retirement programmes, including unemployment-related and disability schemes. Pooled cross-country time-series regressions show that increased disincentives to work at older ages have contributed significantly to the drop in labour-force participation rates of older males, but also demonstrate that the deterioration of labourmarket conditions in many countries has played a significant role as well ... Cet article examine les principaux determinants de la decision de quitter le marche du travail, dans certains pays de l’OCDE, et en particulier le role des systemes de securite sociale dans la diminution du taux d’activite des personnes âgees dans les dernieres decennies. Il demontre que dans quasiment tous les pays de l’OCDE au milieu des annees 90, les systemes d’assurance-vieillesse ont rendu financierement peu attrayant le fait de travailler apres 55 ans, et que l’impot implicite sur la poursuite de l’activite a fortement cru depuis les annees 60 dans la plupart des pays. Les contre-incitations financieres a la poursuite du travail ont ete amplifies par divers programmes de retraite anticipee, parmi lesquels des systemes lies au chomage et a l’invalidite. Les regressions des series chronologiques transversals regroupees montrent que des contre-incitations accrues a travailler a un âge tardif ont significativement contribue a la baisse du taux d’activite des hommes âges, mais ...

Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries

In this paper the authors provide an analysis of the process of creative destruction across 24 countries and 2-digit industries over the past decade. They rely on a newly assembled dataset that draws from different micro data sources (business registers, census, or representative enterprise surveys). The novelty of their approach is in the harmonization of firm-level data across countries, which enables international comparisons and the identification of country-specific factors as opposed to sector and time effects. All countries display a massive reallocation of resources, with the entry and exit of many firms in all markets, the failure of many newcomers and the expansion of successful ones. This process of creative destruction affects productivity directly by reallocating resources toward more productive uses, but also indirectly through the effects of increased market contestability. There are also large differences across groups of countries. While entry and exit rates are fairly similar across industrial countries, post-entry performance differs markedly between Europe and the United States, a potential indication of the importance of barriers to firm growth as opposed to barriers to entry. Transition economies show an even more impressive process of creative destruction and, those that have progressed the most toward a market economy show better outcomes from this process. Finally, Mexico shows large firm dynamics with many new firms entering the battle but also many failing rapidly, while Argentina resembles Continental Europe with smaller flows and less impressive post-entry growth of successful firms.

Regulation, Productivity and Growth

In this paper, we relate the scope and depth of regulatory reforms to growth outcomes in OECD countries. By means of a new set of quantitative indicators of regulation, we show that the cross-country variation of regulatory settings has increased in recent years, despite extensive liberalisation and privatisation in the OECD area. We then look at the regulation-growth linkage using data that cover a large set of manufacturing and service industries over the past two decades. We focus on multifactor productivity (MFP), which plays a crucial role in GDP growth and accounts for a significant share of its cross-country variance. We find evidence that reforms promoting private governance and competition (where these are viable) tend to boost productivity. Both privatisation and entry liberalisation are estimated to have a positive impact on productivity. In manufacturing the gains are greater the further a given country is from the technology leader, suggesting that regulation limiting ...

Does Human Capital Matter for Growth in OECD Countries? Evidence from Pooled Mean-Group Estimates

This paper presents empirical estimates of human-capital augmented growth equations for a panel of 21 OECD countries over the period 1971-98. It uses an improved dataset on human capital and a novel econometric technique that reconciles growth model assumptions with the needs of panel data regressions. Unlike several previous studies, our results point to a positive and significant impact of human capital accumulation to output per capita growth. The estimated long-run effect on output of one additional year of education (about 6 per cent) is also consistent with microeconomic evidence on the private returns to schooling. We also found a significant growth effect from the accumulation of physical capital and a speed of convergence to the steady state of around 15 per cent per year. Taken together these results are not consistent with the human capital augmented version of the Solow model, but rather they support an endogenous growth model a la Uzawa-Lucas, with constant returns to ... Ce document presente des estimations d’equations de croissance etendues pour tenir compte du capital humain estimees sur des donnees de panel pour 21 pays de l’OCDE pour la periode 1971-98. Le document est base sur des series revisees de capital humain et une procedure econometrique nouvelle qui reconcilie les hypotheses d’un modele de croissance avec les contraintes des regressions de panel. Contrairement a plusieurs etudes precedentes, nos resultats suggerent un impact positif et significatif de l’accumulation du capital humain sur la croissance de la production par tete. Selon nos estimations, une annee supplementaire de niveau moyen d’etudes dans un pays aurait un effet positif a long terme sur la production (de 6 pour cent approximativement), ce qui est en accord avec l’evidence microeconomique sur le taux de rendement prive de l’investissement en education. On trouve egalement des effets significatifs de l’investissement en capital physique sur la production est une vitesse de convergence vers l’equilibre a long terme de 15 pour cent par an en moyenne. Dans leur ensemble, ces resultats ne sont pas coherents avec le modele de Solow etendu pour tenir compte du capital humain. Cependant ils sont compatibles avec un modele de croissance endogene a la Uzawa-Lucas, avec des rendements d’echelle constants par rapport au capital...

Does human capital matter for growth in OECD countries? A pooled mean-group approach

Abstract Unlike previous panel-data studies, using an improved dataset and PMG estimators, we find a significant impact of human capital on growth. The estimated long-run elasticity of output to human capital is consistent with the microeconomic evidence on returns to schooling.

Assessing Job Flows Across Countries: The Role of Industry, Firm Size, and Regulations

This paper analyzes job flows in a sample of 16 industrial and emerging economies over the past decade, exploiting a harmonized firm-level dataset. It shows that industry and firm size effects (and especially firm size) account for a large fraction in the overall variability in job flows. However, large residual differences remain in the job flow patterns across countries. To account for the latter, the paper explores the role of differences in employment protection legislation across countries. Using a difference-in-difference approach that minimizes possible endogeneity and omitted variable problems, our findings show that hiring and firing costs tend to curb job flows, particularly in those industries and firm size classes that require more frequent labor adjustment.

Economic Growth: The Role of Policies and Institutions. Panel Data Evidence from OECD Countries

This paper discusses links between policy settings, institutions and economic growth in OECD countries on the basis of cross-country time-series regressions. The econometric approach allows short-term adjustments and convergence speeds to vary across countries, imposing restrictions only on the long-run coefficients. In addition to the ‘primary’ influences of capital accumulation and skills embodied in the human capital, the results confirm the importance for growth of R&D activity, the macroeconomic environment, trade openness and well developed financial markets. They also confirm that many of the policy influences operate not only ‘directly’ on growth but also indirectlyviathe mobilisation of resources for fixed investment. The paper also reports some bivariate correlations between OECD indicators of product regulation and growth. They provide some supporting evidence that the negative impact of stringent regulations and administrative burden on the efficiency of product ... Ce document analyse les liens entre la croissance economique et les politiques et les institutions dans les pays de l’OCDE sur la base de regressions en coupe transversale et en series temporelles. L’approche econometrique permet aux parametres de court terme et a la vitesse de convergence de varier d’un pays a l’autre, alors que seuls les parametres de long terme sont estimes communs. Au-dela du role “primaire” joue par l’accumulation du capital physique et humain, les resultats confirment l’importance pour la croissance de l’activite de R-D, du cadre macroeconomique, ainsi que de l’ouverture aux echanges et du developpement des marches financiers. Les resultats confirment que les variables politiques influencent la croissance economique non seulement directement, mais aussi indirectement par le biais de l’accumulation du capital. Le document montre enfin des correlations bivariees entre des indicateurs de regulation sur les marches des produits et la croissance economique dans ...

Knowledge Technology and Economic Growth: Recent Evidence from OECD Countries

This paper discusses some of the recent developments in growth theory, doing so from the perspective of a small open economy. After setting out a basic generic model, we show how it may yield two of the key models that have played a prominent role in the recent literature, the endogenous growth model and the non-scale growth model. We focus initially on the former, emphasizing how the simplest such model leads to an equilibrium in which the economy is always on its balanced growth path. One aspect of the model is the importance of fiscal policy as a determinant of the equilibrium growth rate, an aspect that is discussed in detail. We also show how the endogeneity or otherwise of the labor supply is crucial in determining the equilibrium growth rate and its responsiveness to macroeconomic policy. But transitional dynamics are an important aspect of the growth process and indeed much research has been directed to determining the speed with which the economy converges to its balanced growth path. We discuss alternative ways that such transitional dynamics may be introduced. These include (i) restricted access to the world capital market; (ii) the introduction of government capital , and (iii) the two-sector production model, pioneered by Lucas. In the original analysis, the two capital goods relate to physical and human capital and in the international context these naturally can be identified with traded and nontraded capital, respectively. Criticism of the endogenous growth model has led to the development of the nonscale growth model. This too is characterized by transitional dynamics, which are more flexible than those of the corresponding endogenous growth model. This model is much closer to the neoclassical model; in particular, the long-run growth rate is independent of macroeconomic policy. However, since such models are typically associated with slow convergence speeds, policy can influence the accumulation of capital for extended periods of time, leading to significant long-run level effects. The discussion seeks to emphasize the adaptability of the models to a wide range of issues. A final extension addresses the impact of volatililty on growth. This has been extensively analyzed empirically and a stochastic extension of the endogenous growth model provides a convenient framework within which to interpret this research.

Regulation and Labour Market Performance

The increasing literature on the interactions between liberalization-integration of product markets and labour market reforms is often highly speculative and draws on a rather weak empirical basis. Cross-country indicators of regulatory frameworks are often lacking, making it difficult to identify the linkages with observed outcomes in the labour and product markets. Moreover, empirical studies have often focussed exclusively on the impact of certain labour market regulations, largely ignoring the role of product market regulations and the interactions between regulatory interventions in the two markets. As a result, while there are convincing theoretical arguments pointing to a potentially positive effect of product market liberalization on labour market performance, empirical investigations of this issue are lacking. This paper aims to provide some preliminary evidence on these issues. In particular, the cross-country patterns and changing profile of product and labour market regulations are identified. Evidence on the relationships between product and labour market regulations is discussed in the context of other policies and institutional factors affecting the labour market; and the clustering and convergence of institutions across countries are characterized. More importantly, the paper reports evidence of a potentially significant impact of product and labour market regulations on employment and its composition. The evidence presented draws heavily on a novel set of cross-country indicators of regulation in the product and labour markets assembled at the OECD. It should be stressed at the outset that these indicators are preliminary estimates and should be taken only as rough approximations of the regulatory stance across OECD countries. (The indicators are used in this paper under the exclusive responsibility of the authors and do not engage the OECD or its Member countries.)