Competition, technological change and productivity gains: the contribution of information technologies

Stephane Ciriani and François Jeanjean

30th European Regional ITS Conference, Helsinki 2019 from International Telecommunications Society (ITS)

Abstract: This paper addresses the empirical relationship between the level of competition and the rate of productivity growth across thirty sectors of the French production system during the period 1978- 2015. It shows that there exists an optimal level of competition for each sector that is defined by the mark-up that maximizes the growth rate of labor productivity. The information technologies Sectors have the highest mark-ups for maximizing productivity growth. The persistence of nonoptimal mark-ups in French sectors is associated with a 0.4% loss in aggregate average annual labor productivity growth during the period (1.86%). Hence, long-term productivity growth could have reached 2.25% if mark-ups had been at their optimal level. There is a strong significant positive correlation between the optimal mark-up and the rate of Hicks-neutral technical progress in each sector. This finding implies that sectors with high technical progress, as information technologies sectors, require higher mark-ups to maximize their rate of labor productivity growth. Overall, the aggregate economy would benefit from a decrease in the gap between nonoptimal and optimal mark-ups, as such an alignment would foster productivity growth.

Keywords: Technical progress; productivity growth; mark-up (search for similar items in EconPapers)
JEL-codes: L16 O11 O31 O47 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-eff, nep-gro, nep-ict and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:itse19:205175

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