Product market regulation, business churning and productivity: evidence from the European Union countries

Robert Anderton, Benedetta Di Lupidio and Barbara Jarmulska

No 2332, Working Paper Series from European Central Bank

Abstract: Productivity performance in European countries has been a policy concern for some time. This paper shows that productivity can be enhanced by product market policies which, by increasing competition and efficiency, facilitate higher rates of firms’ entry and exit (i.e., firm churning). Drawing on annual country-sector data for the period 2000-2014 across the EU countries, we find that: (i) competition-enhancing regulation is associated with a higher rate of firm churning; (ii) business churning, in turn, appears to be positively related to higher total factor productivity at the sector level by facilitating the entry of new competitive firms and the exit of less productive ones. Overall, we conclude that stringent product market regulation can be indirectly associated, via its impact on business dynamism, with the somewhat weak productivity performance in a number of EU countries. Thus, our results point towards significant productivity gains that could follow from the introduction of further competition-enhancing measures in product markets. JEL Classification: L51, P23, D21, D24, O40

Keywords: creative destruction; growth; product market; regulation; total factor productivity (search for similar items in EconPapers)
Date: 2019-11
Note: 339014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The impact of product market regulation on productivity through firm churning: Evidence from European countries (2020)
Working Paper: Product market regulation, business churning and productivity: Evidence from the European Union countries (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20192332

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