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Regulation, institutions and productivity: New macroeconomic evidence from OECD countries

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  • Balázs Égert

    (OECD)

Abstract

Empirical research on the drivers of multi-factor productivity (MFP) is abundant at the firm- and industry level but surprisingly little research has been conducted on the determinants of MFP at the macroeconomic level. In this paper, we seek to understand the drivers of country-level MFP with a special emphasis on product and labour market policies and the quality of institutions. For a panel of OECD countries, we find that anticompetitive product market regulations are associated with lower MFP levels and that higher innovation intensity and greater openness go in tandem with higher MFP. We also find that the impact of product market regulations on MFP may depend on the level of labour market regulations. Better institutions, a more business friendly environment and lower barriers to trade and investment amplify the positive impact of R&D spending on MFP. Finally, we also show that cross-country MFP variations can be explained to a considerable extent by cross-country variation in labour market regulations, barriers to trade and investment and institutions (including corruption).

Suggested Citation

  • Balázs Égert, 2017. "Regulation, institutions and productivity: New macroeconomic evidence from OECD countries," OECD Economics Department Working Papers 1393, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1393-en
    DOI: 10.1787/579ceba4-en
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    More about this item

    Keywords

    human capital; measurement; multi-factor productivity; OECD;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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