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Product Market Reforms and Productivity: A Review of the Theoretical and Empirical Literature on the Transmission Channels

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Abstract

Product market reforms are microeconomic structural reforms that aim to improve the functioning of product markets by increasing competition amongst producers of goods and services. Theoretical models suggest that regulation and reforms which liberalise or improve the functioning of markets can positively affect productivity through three different channels, namely a reallocation of scarce resources (allocative efficiency), an improvement in the utilisation of the production factors by firms (productive efficiency) and an incentive for firms to innovate to move to the modern technology frontier (dynamic efficiency). This paper reviews the theoretical and empirical literature on these three channels and discusses policy implications for the European Union.

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Authors and Affiliations

  1. European Commission and Solvay Business School (ULB), Brussels, Belgium

    Gaëtan Nicodème

  2. Banque de France, Paris, France

    Jacques-Bernard Sauner-Leroy

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  1. Gaëtan Nicodème
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Correspondence to Gaëtan Nicodème.

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The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They should not be attributed to the European Commission nor the Banque de France. Helpful comments from Fabienne Ilzkovitz, Una Oligbo, Jan Schmidt and one anonymous referee are gratefully acknowledged. Errors and omissions are entirely those of the authors.

This article was written by Gaëtan NICODEME, DG Economic and Financial Affairs.© European Communities, 2007

The views expressed in this Article are those of the author(s) and do not necessarily reflect the official position of the European Commission.

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Nicodème, G., Sauner-Leroy, JB. Product Market Reforms and Productivity: A Review of the Theoretical and Empirical Literature on the Transmission Channels. J Ind Compet Trade 7, 53–72 (2007). https://doi.org/10.1007/s10842-006-0417-0

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