Productivity and Regulation in the Construction Sector: Evidence for OECD Countries

Abdoulaye Kane () and Jimmy Lopez
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Abdoulaye Kane: CSTB - Centre Scientifique et Technique du Bâtiment, UPN SEGMI - Université Paris Nanterre - UFR Sciences économiques, gestion, mathématiques, informatique - UPN - Université Paris Nanterre, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Jimmy Lopez: LEDi - Laboratoire d'Economie de Dijon [Dijon] - UB - Université de Bourgogne - UBFC - Université Bourgogne Franche-Comté [COMUE]

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Abstract: Labor productivity growth in the construction sector has been very weak in recent decades in most OECD countries. This paper addresses this issue based on a panel of 23 countries over the period 1995-2015. First, we use the Ackerberg, Caves, and Frazer (2015) method to propose a multifactor explanation for this lack of productivity growth: (i) average TFP growth is close to zero and even negative for most countries; (ii) average contributions to growth of capital and intermediate inputs are positive but weak, respectively of 0.05% and 0.90% per year, and much smaller than in the manufacturing sector over the same period (respectively of 0.40% and 3.10% per year). Then, we investigate whether reforms of regulations specific to the construction sector might boost productivity there. Using regulation indicators from the "Doing Business Report", we find a negative impact of these regulations on TFP, but not on the intensities of capital and intermediate inputs. Our results suggest that reducing the construction sector regulations might bolster productivity: a switch to the lightest regulations would lead to a long-term TFP increase of 6% on average.

Keywords: Construction sector; Production function; Labor productivity; Total factor productivity; Regulation and business law (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-eff
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Published in Applied Economics, inPress, ⟨10.1080/00036846.2023.2208845⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04117046

DOI: 10.1080/00036846.2023.2208845

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