Competition policy and labor productivity growth: some new evidence

This article contributes to the empirical literature on the impact of competition policy on labor productivity (LP) growth, focusing specifically on EU countries. We capture the quality of competition policy by the Competition Policy Indices (CPIs), proposed, constructed and used recently by Buccirossi et al. (J Compet Law Econ 7:165–204, 2011; Rev Econ Stat 95(4):1324–1336, 2013). We construct these indices also for Greece for the period 1995–2013 and use them to study the effect of competition policy on LP growth in 22 industries for a set of 10 EU countries. We find that the CPI has a positive and statistically significant effect on LP growth. Most importantly, we also investigate possible heterogeneity of this effect by separating the countries of our sample in two groups, Laggards and Leaders. We find that the effect of the CPI on LP growth for the Laggards is about three times as large as the effect estimated for all ten countries in our sample, while it is very small and statistically insignificant for the Leaders. Finally, when we estimate the effect only for Greece the coefficient increases substantially although it is estimated quite imprecisely, reinforcing our finding that gains from increasing the quality of competition policy and making product market competition more effective are to be reaped mainly by countries for which there is the greatest scope for improving the effectiveness of product market competition.