This paper examines the role of removing obstacles to competition in product markets in raising growth and productivity. Using firm-level data from Italy during 2003–13 and OECD measures of product market regulation, we estimate the effect of deregulation in network sectors on value added and productivity of firms in these sectors, as well as firms using these intermediates in their production processes. We find evidence of a significant positive impact. These effects are more pronounced in Italian provinces with more efficient public administration, underscoring the complementarities of advancing public administration and product market reforms simultaneously.

This paper assesses the effects of structural reforms on firm-level productivity for 37 developing countries from 2006 to 2014 period. It takes advantage of the IMF Monitoring of Fund Arrangements dataset for reform indexes and the World Bank Enterprise Surveys for firm-level productivity. The paper highlights the following results. Structural reforms such as financial, fiscal, real sector, and trade reforms, significantly improve firm-level productivity. Interestingly, real sector reforms have the most sizeable effects on firm-level productivity. The relationship between structural reforms and firm-level productivity is nonlinear and shaped by some firms’ characteristics such as the financial access, the distortionary environment, and the size of firms. The pace of structural reforms matters since being a “strong reformer” is associated with a clear productivity dividend for firms. Finally, except for financial and trade reforms, all structural reforms under consideration are bilaterally complementary in improving firm-level productivity. These findings are robust to several sensitivity checks.

This paper presents empirical evidence on the impact of competition on firm productivity. Using firm-level observations from the World Bank Enterprise Survey database, we find a positive and robust causal relationship between our proxies for competition and our measures of productivity. We also find that countries that implemented product-market reforms had a more pronounced increase in competition, and correspondingly, in productivity: the contribution to productivity growth due to competition spurred by product-market reforms is around 12-15 percent.

This paper studies the macroeconomic effect and underlying firm-level transmission channels of a reduction in business entry costs. We provide novel evidence on the response of firms' entry, exit, and employment decisions. To do so, we use as a natural experiment a reform in Portugal that reduced entry time and costs. Using the staggered implementation of the policy across the Portuguese municipalities, we find that the reform increased local entry and employment by, respectively, 25% and 4.8% per year in its first four years of implementation. Moreover, around 60% of the increase in employment came from incumbent firms expanding their size, with most of the rise occurring among the most productive firms. Standard models of firm dynamics, which assume a constant elasticity of substitution, are inconsistent with the expansionary and heterogeneous response across incumbent firms. We show that in a model with heterogeneous firms and variable markups the most productive firms face a lower demand elasticity and expand their employment in response to increased entry.

The COVID-19 pandemic struck the global economy after a decade that featured a broad-based slowdown in productivity growth. Global Productivity: Trends, Drivers, and Policies presents the first comprehensive analysis of the evolution and drivers of productivity growth, examines the effects of COVID-19 on productivity, and discusses a wide range of policies needed to rekindle productivity growth. The book also provides a far-reaching data set of multiple measures of productivity for up to 164 advanced economies and emerging market and developing economies, and it introduces a new sectoral database of productivity. The World Bank has created an extraordinary book on productivity, covering a large group of countries and using a wide variety of data sources. There is an emphasis on emerging and developing economies, whereas the prior literature has concentrated on developed economies. The book seeks to understand growth patterns and quantify the role of (among other things) the reallocation of factors, technological change, and the impact of natural disasters, including the COVID-19 pandemic. This book is must-reading for specialists in emerging economies but also provides deep insights for anyone interested in economic growth and productivity. Martin Neil Baily Senior Fellow, The Brookings Institution Former Chair, U.S. President’s Council of Economic Advisers This is an important book at a critical time. As the book notes, global productivity growth had already been slowing prior to the COVID-19 pandemic and collapses with the pandemic. If we want an effective recovery, we have to understand what was driving these long-run trends. The book presents a novel global approach to examining the levels, growth rates, and drivers of productivity growth. For anyone wanting to understand or influence productivity growth, this is an essential read. Nicholas Bloom William D. Eberle Professor of Economics, Stanford University The COVID-19 pandemic hit a global economy that was already struggling with an adverse pre-existing condition—slow productivity growth. This extraordinarily valuable and timely book brings considerable new evidence that shows the broad-based, long-standing nature of the slowdown. It is comprehensive, with an exceptional focus on emerging market and developing economies. Importantly, it shows how severe disasters (of which COVID-19 is just the latest) typically harm productivity. There are no silver bullets, but the book suggests sensible strategies to improve growth prospects. John Fernald Schroders Chaired Professor of European Competitiveness and Reform and Professor of Economics, INSEAD

The growth of Italian exports has lagged that of euro area peers. Against the backdrop of unit labor costs that have risen faster than those in euro area peers, this paper examines whether there is a competitiveness challenge in Italy and evaluates the framework of wage bargaining. Wages are set at the sectoral level and extended nationally. However, they do not respond well to firm-specific productivity, regional disparities, or skill mismatches. Nominally rigid wages have also implied adjustment through lower profits and employment. Wage developments explain about 45 percent of the manufacturing unit labor cost gap with Germany. In a search-and-match DSGE model of the Italian labor market, this paper finds substantial gains from moving from sectoral- to firm-level wage setting of at least 3.5 percentage points lower unemployment (or higher employment) rate and a notable improvement in Italy’s competitiveness over the medium term.

This Selected Issues paper analyzes France’s fiscal stance using a structural stochastic model. The theoretical model features a forward-looking benevolent government that needs to decide the optimal fiscal stance given the level of public debt, the cyclical position of the economy, and expectations about future shocks. This paper shows that a fiscal consolidation can help build buffers that could help France confront the next downturn from a stronger fiscal position. The analysis highlights that, on average, fiscal policy in France exhibited a deficit bias over the past four decades, being unable to react to either rising debt levels, or cyclical conditions. A model-based analysis further confirms that fiscal policy was generally looser than warranted by cyclical and debt sustainability considerations, and this is only partly due to the fact policymakers need to take decisions based on real-time output gap measures that are subject to uncertainty.

This report represents the second outcome of the collaboration between the Asian Productivity Organization (APO) and the Organisation for Economic Co-operation and Development (OECD) to improve the measurement and analysis of productivity developments across APO and OECD member economies. The report discusses the potential impact of COVID-19 on productivity and examines the role of Multifactor Productivity (MFP) as a major driver of economic growth and changes in living standards.

This paper analyzes the effects of product market reforms in the short and medium term across 10 regulated industries and 18 advanced economies for the period 1998-2013 using internationally comparable firm-level data based on Orbis. It provides four key insights. First, product market reforms have positive effects on capital, output and employment and their effects increase over time. After two years, they raise capital by 4%, output by 3% and employment by 1.5%. Second, differences in production technology and the nature of product market regulations across sectors generate important differences in the mechanisms through which reforms operate. In network industries, reforms tend to benefit small firms, while the opposite is observed in retail trade. Product market reforms also promote firm entry, particularly those that reduce entry barriers. Third, credit constraints can play an important role in weakening the positive impact of product market reform on investment. Fourth, product market reforms also tend to have positive effects on firms in downstream sectors—both at home and abroad—that make intensive use of intermediate inputs from deregulated sectors.