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Upstream regulation, factor demand and productivity: Cross-industry differences in OECD countries, 1975–2007

Author

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  • Igna, Ioana A.
  • Rincon-Aznar, Ana
  • Venturini, Francesco

Abstract

Based on international industry data between 1975 and 2007, this paper studies the production effects of upstream (service) regulation considering two different mechanisms of transmission: the productivity channel and the factor demand channel. The analysis shows that the effects of anti-competition barriers in service markets transmit to the rest of the economy varying with the technology conditions of downstream firms. Upstream regulation is found to lower productivity directly – mainly reducing efficiency levels in network industries – and indirectly by curbing the demand for labour – mainly in the manufacturing sector. However, we show that downstream firms react to high anti-competition barriers in intermediate input (service) markets by investing more intensively in ICT capital goods, probably to produce intangible tasks internally. The aggregate effects of service regulation are quantitatively important and can help explain the wide productivity differentials existing across OECD countries.

Suggested Citation

  • Igna, Ioana A. & Rincon-Aznar, Ana & Venturini, Francesco, 2019. "Upstream regulation, factor demand and productivity: Cross-industry differences in OECD countries, 1975–2007," Information Economics and Policy, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:iepoli:v:49:y:2019:i:c:s0167624518302385
    DOI: 10.1016/j.infoecopol.2019.07.002
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    Cited by:

    1. DUERNECKER Georg & SANCHEZ MARTINEZ Miguel, 2021. "Structural change and productivity growth in the European Union: Past, present and future," JRC Working Papers on Territorial Modelling and Analysis 2021-09, Joint Research Centre.
    2. María E. Pérez-Pons & Marta Plaza-Hernández & Ricardo S. Alonso & Javier Parra-Domínguez & Javier Prieto, 2020. "Increasing Profitability and Monitoring Environmental Performance: A Case Study in the Agri-Food Industry through an Edge-IoT Platform," Sustainability, MDPI, vol. 13(1), pages 1-16, December.
    3. Peter Bauer & Igor Fedotenkov & Aurelien Genty & Issam Hallak & Peter Harasztosi & David Martinez Turegano & David Nguyen & Nadir Preziosi & Ana Rincon-Aznar & Miguel Sanchez Martinez, 2020. "Productivity in Europe: Trends and drivers in a service-based economy," JRC Research Reports JRC119785, Joint Research Centre.

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    More about this item

    Keywords

    Upstream regulation; Productivity; Labour demand; ICT/non-ICT investment;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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