No. 134. LONG RUN EFFECTS OF REGULATION ACROSS OECD COUNTRIES: PANEL DATA EVIDENCE WITHIN A PRODUCTIVITY CONVERGENCE MODEL
S. Papaioannou. 2014.
The purpose of this paper is to econometrically quantify the long run impact of market regulation on TFP (Total Factor Productivity) in OECD economies. To this end, recently developed panel data econometric techniques are used to distinct between short run and long run effects, to account for country heterogeneity and to control for the presence of common factors across countries. The results of this study indicate the presence of a long run equilibrium relationship between regulation and TFP. The empirical evidence of the estimated dynamic error correction model reveals that, in the long run, lower regulation exerts a significantly positive effect on TFP in OECD countries. This impact is robust only in the group of more productive countries. Short run effects of regulation on TFP are not statistically significant.