Économie et Statistique n° 419-420 - Productivity, Institutions and Economic Policy
Distance from the Technological Frontier, Market Rigidities, Education, and Growth
This study ties in with recent literature on how a country’s growth determinants are shaped by its technological position. In addition to the effects of education and regulations on the goods market and labour market, we also explore potential interaction between these regulations. We use data on 17 OECD countries for the period 1985-2003. Our main novel findings are the characterization of the effects of (1) the education level of the working-age population and (2) rigidities in the goods market and labour market on total factor productivity (TFP) growth. For countries close to the technological frontier, the effects seem very significant. An interaction between the rigidities in the two markets is clearly visible. The strong impact of higher-education level and rigidities on TFP growth appears to reflect a direct influence and an indirect effect via the diffusion of ICTs. In the goods market, the “entry barriers”, “market structure”, and “degree of vertical integration” seem to have a major influence. For countries far from the technological frontier, our estimates show that the higher-education level of the working-age population and rigidities in the goods market and labour market do not necessarily have a significant impact on TFP growth. These results underscore the importance of gains in productivity growth, and therefore in potential GDP growth, that some industrialized countries—mainly in Europe, including France—could expect from policies aimed at raising the education level of the working-age population and at reducing rigidities in the goods market and labour market.