Skip to main content
Log in

Competition policy and labor productivity growth: some new evidence

Empirical Economics Aims and scope Submit manuscript

Cite this article


This article contributes to the empirical literature on the impact of competition policy on labor productivity (LP) growth, focusing specifically on EU countries. We capture the quality of competition policy by the Competition Policy Indices (CPIs), proposed, constructed and used recently by Buccirossi et al. (J Compet Law Econ 7:165–204, 2011; Rev Econ Stat 95(4):1324–1336, 2013). We construct these indices also for Greece for the period 1995–2013 and use them to study the effect of competition policy on LP growth in 22 industries for a set of 10 EU countries. We find that the CPI has a positive and statistically significant effect on LP growth. Most importantly, we also investigate possible heterogeneity of this effect by separating the countries of our sample in two groups, Laggards and Leaders. We find that the effect of the CPI on LP growth for the Laggards is about three times as large as the effect estimated for all ten countries in our sample, while it is very small and statistically insignificant for the Leaders. Finally, when we estimate the effect only for Greece the coefficient increases substantially although it is estimated quite imprecisely, reinforcing our finding that gains from increasing the quality of competition policy and making product market competition more effective are to be reaped mainly by countries for which there is the greatest scope for improving the effectiveness of product market competition.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others


  1. See, for review of empirical evidence, Sect. 2.

  2. For instance, the UK Office of Fair Trading (OFT) measures the direct benefits to consumers arising from its activities based on the 5:1 target agreed with HM Treasury, which implies that the financial benefits to consumers should be at least five times the cost for the taxpayer per year, on average, over the period 2008 to 2011 (Office of Fair Trading 2008). In the USA, the US Department of Justice is obliged, under the Government Performance and Results Act (GPRA), to estimate the savings to consumers from its actions on a yearly basis (Werden 2008; Hüschelrath and Leheyda 2010).

  3. These are described below.

  4. See a recent paper comparing effectiveness of competition authorities (by Meiklejohn 2014) in which authorities are ranked by the number of stars assigned by the GCR (Global Competition Review), the Staff per population ratio and the antitrust budget per GDP ratio.

  5. On the basis of, for example, the relevant World Economic Forum indicators—see, for example, Katsoulacos et al. (2018).

  6. See Katsoulacos et al. (2018).


  8. Buccirossi et al. (2011) pursue robustness checks to show that the choice of the weights does not have a significant impact on their results.

  9. For further information about the calculation of the medium- and the high-level CPIs, see “Appendix 2”.

  10. Later Acts strengthened further the organization and the powers of the HCC (Act 2741/1999; Act 2837/2000; Act 3373/2005).

  11. The calculation of some elements of the low-level indices involves information of the best-performing country in the sample. Such data are not available to us, and in our calculations we assume that the UK is the best-performing country in our sample. UK has been chosen using the information in a recent paper comparing effectiveness of competition authorities (by Meiklejohn 2014). In this, authorities are ranked by the number of stars assigned to them by the GCR (Global Competition Review), the Staff per population ratio and the antitrust budget per GDP ratio. The ranking on the basis of these indices justifies the use of UK as the European benchmark.

  12. We use 1.5 as the value of this coefficient. We also experimented with values of 2 and 5 which brought changes to the CPI only at the third decimal. Our results are robust to the choice of this coefficient and are not reported in the paper for brevity.

  13. The set of industries in our study include: agriculture, hunting, forestry and fishing; mining and quarrying; food, beverages and tobacco; textiles, textile, leather and footwear; wood and of wood and cork; pulp, paper, printing and publishing; coke, refined petroleum and nuclear fuel; chemicals and chemical products; rubber and plastics; other non-metallic mineral; basic metals and fabricated metal; machinery, not elsewhere classified; electrical and optical equipment; transport equipment; manufacturing, not elsewhere classified, recycling; electricity, gas and water supply; construction; hotels and restaurants; transport and storage; post and telecommunications; financial intermediation; real estate, renting and business services.

  14. For further information, see Wölfl et al. (2009).

  15. In Appendix, we report results with PMR imputed using linear regression.

  16. We fill in the data for the intermediate years using linear interpolation when these variables are used in our estimations.

  17. The large drop in the observations used in the estimation is due mainly to missing observations for the human capital variable used (the educational attainment in tertiary education as a percentage of total labor force, as obtained from the OECD).

  18. See also Meiklejohn (2014).

  19. On the basis of, for example, the relevant World Economic Forum indicators—see, for example, Katsoulacos et al. (2018).

  20. See Aghion and Griffith (2005) for a similar finding regarding the effect of competition on innovation.

  21. In Appendix Table 13, we present results for different model specifications as well as with different measures of human capital and a regression-based imputed PMR. In general, the results do not change much except when trade openness is dropped from the set of controls.

  22. Buccirossi et al. (2013) use grouping of countries according to EU and non-EU membership.

  23. The second type of instrument for PMR is dropped from all IV regressions as it turns out to be collinear with the year dummies.


  • Aghion P, Griffith R (2005) Competition and growth: reconciling theory and evidence. MIT Press, Cambridge

    Google Scholar 

  • Aghion P, Blundell R, Griffith R, Howitt P, Prantl S (2004) Entry and productivity growth: evidence from micro-level panel data. J Eur Econ Assoc 2(2–3):265–276

    Article  Google Scholar 

  • Aghion P, Braun M, Fedderke J (2008) Competition and productivity growth in South Africa. Econ Transit 16(4):741–768

    Article  Google Scholar 

  • Aghion P, Blundell R, Griffith R, Howitt P, Prantl S (2009) The effects of entry on incumbent innovation and productivity. Rev Econ Stat 91(1):20–32

    Article  Google Scholar 

  • Ahn S (2002) Competition, innovation and productivity growth: a review of theory and evidence. OECD Economics Working Paper No. 317

  • Alesina A, Ardagna S, Nicoletti G, Schiantarelli F (2005) Regulation and investment. J Eur Econ Assoc 3(4):791–825

    Article  Google Scholar 

  • Arnold J, Nicoletti G, Scarpetta S (2008) Regulation, allocative efficiency and productivity in OECD Countries: industry and firm-level evidence. OECD Economics Department Working Papers No. 616, OECD Publishing

  • Arnold J, Nicoletti G, Scarpetta S (2011) Does anti-competitive regulation matter for productivity? Evidence from European firms. IZA Discussion Papers 5511, Institute for the Study of Labor (IZA)

  • Barro R, Lee J-W (2010) A new data set of educational attainment in the world, 1950–2010. J Dev Econ 104:184–198

    Article  Google Scholar 

  • Borrell JR, Tolosa M (2008) Endogenous antitrust: cross-country evidence on the impact of competition-enhancing policies on productivity. Appl Econ Lett 15(11):827–831

    Article  Google Scholar 

  • Brandt N (2004) Business dynamics, regulation and performance. OECD Science, Technology and Industry Working Paper No. 2004/3

  • Buccirossi P, Ciari L, Duso T, Spagnolo G, Vitale C (2011) Measuring the deterrence effect of competition policy: the competition policy indices. J Compet Law Econ 7:165–204

    Article  Google Scholar 

  • Buccirossi P, Ciari L, Duso T, Spagnolo G, Vitale C (2013) Competition policy and productivity growth: an empirical assessment. Rev Econ Stat 95(4):1324–1336

    Article  Google Scholar 

  • Cincera M, Galgau O (2005) Impact of market entry and exit on EU productivity and growth performance. European Commission DG for Economic and Financial Affairs Economic Papers No. 222

  • Clark R, Da Silva L (2009) Regulation and growth. Centre for Productivity and Prosperity, HEC Montreal. Accessed 21 Feb 2019

  • Conway P, Rosa DD, Nicoletti G, Steiner F (2006) Règlementation des marchés de produits et convergence de la productivité. Revue économique de l’OCDE43

  • Crafts N (2012) British relative economic decline revisited: the role of competition. Explor Econ Hist 49(1):17–29

    Article  Google Scholar 

  • Disney R, Haskel J, Heden Y (2003) Restructuring and productivity growth in UK manufacturing. Econ J 113(489):666–694

    Article  Google Scholar 

  • Djankov S, McLeish C, Ramalho R (2006) Regulation and growth. World Bank Working Paper. Accessed 21 Feb 2019

  • Dutz M, Hayri A (1999) Does more intense competition lead to higher growth? Policy Research Working Paper No. 2320, World Bank

  • Dutz M, Vagliasindi M (2000) Rules versus implementation: determinants of competition policy effectiveness in transition countries. EBRD, London

    Google Scholar 

  • Friedman M (1995) Getting back to real growth. Wall Street J A14. August 1

  • Gorgens T, Paldam M, Wurtz A (2003) How does public regulation affect growth? University of Aarhus, Department of Economics, Working Paper No. 2003-14. Accessed 21 Feb 2019

  • Griffith R, Harrison R (2004) The Link between product market reform and macroeconomic performance. European Commission DG for Economic and Financial Affairs Economic Papers No. 209

  • Griffith R, Redding S, Van Reenen J (2004) Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries. Rev Econ Stat 86(4):883–895

    Article  Google Scholar 

  • Griffith R, Harrison R, Simpson H (2006) Product market reform, innovation and EU productivity growth. mimeo, Institute for Fiscal Studies, New York

    Google Scholar 

  • Haidar JI (2012) The impact of business regulatory reforms on economic growth. J Jpn Int Econ 26:285–307

    Article  Google Scholar 

  • Hüschelrath K, Leheyda N (2010) A methodology for the evaluation of competition policy. ZEW—Centre for European Economic Research Discussion Paper No. 10-081

  • International Monetary Fund (2004) World Economic Outlook. International Monetary Fund, Washington

    Google Scholar 

  • Jalilian H, Kirkpatrick C, Parker D (2007) The impact of regulation on economic growth in developing countries: a cross-country analysis. World Dev 35(1):87–103

    Article  Google Scholar 

  • Januszewski SI, Köke J, Winter JK (2002) Product market competition, corporate governance and firm performance: an empirical analysis for Germany. Res Econ 56(3):299–332

    Article  Google Scholar 

  • Javorcik BS, Spatareanu M (2005) Do foreign investors care about labour market regulations? Rev World Econ 141(3):375–403

    Article  Google Scholar 

  • Kahyarara G (2004) Competition policy, manufacturing exports, investment and productivity: farm level evidence from Tanzania Manufacturing Enterprises. Competition, Competitiveness and Development: Lessons from Developing Countries, UNCTAD Publication, UN Symbol: UNCTAD/DITC/CLP/2004/1

  • Katsoulacos Y, Genakos C, Houpis G (2018) Product market regulation and competitiveness: towards a national competition and competitiveness policy in Greece. In: Meghir C, Pissarides C, Vayanos D, Vettas N (eds) Reforming the Greek Economy. MIT Press, Cambridge, pp 139–178

    Google Scholar 

  • Klapper L, Laeven L, Rajan R (2004) Business environment and firm entry: evidence from international data. NBER Working Paper No. 10380

  • Klette TJ (1999) Market power, scale economies and productivity: estimates from a panel of establishment data. J Ind Econ 47(4):451–476

    Article  Google Scholar 

  • Koedijk K, Kremers J (1996) Market opening, regulation and growth in Europe. Econ Policy A Eur Forum 23:445–467

    Google Scholar 

  • Loayza NV, Oviedo AM, Serven L (2005) The impact of regulation on growth and informality: cross - Country evidence. Policy Research Paper WPS3623, World Bank

  • Meiklejohn R (2014) The effectiveness of competition authorities: four questions. Compet Policy Int 10(1):15534.

    Google Scholar 

  • National Audit Office (2003) The Office of Fair Trading: Progress in Protecting Consumers’ Interests. Report by the Comptroller and Audit General, HC 430 Session 2002–2003: 6 March 2003. Accessed 21 Feb 2019

  • Nickell S (1996) Competition and corporate performance. J Political Econ 104(4):724–746

    Article  Google Scholar 

  • Nickell S, Nicolitsas D, Dryden N (1997) What makes firms perform well? Eur Econ Rev 41(3–5):783–796

    Article  Google Scholar 

  • Nicoletti G, Scarpetta S (2003) Regulation, productivity and growth. Policy Research Working Paper 2944, World Bank

  • Nicoletti G, Scarpetta S, Boyland O (1999) Summary indicators of product market regulation with an extension to employment protection legislation. OECD Economics Department Working Paper No. 226

  • Office of Fair Trading (2008) Positive Impact 07/08—Consumer Benefits from Competition Enforcement, Merger Control, Market Studies and Market Investigation References, and Scam Busting

  • Werden G (2008) Assessing the effects of antitrust enforcement in the United States. Econ 156(4):433–451

    Google Scholar 

  • Wölfl A, Wanner I, Kozluk T, Nicoletti G (2009) Ten Years of product market reform in OECD Countries—insights from a revised PMR Indicator. OECD Economics Department Working Paper, No 695, OECD, Paris

  • Zhang Y, Parker D, Kirkpatrick C (2005) Competition, regulation and privatization of electricity generation in developing countries: does the sequencing of the reforms matter? Q Rev Econ Finance 45:358–379

    Article  Google Scholar 

Download references


We would like to thank Paolo Buccirossi, Giancarlo Spagnolo and Cristiana Vitale for very useful discussions in relation to the data used and more generally the subject of the paper as well as for providing the data relating to the CPI. We also thank the HCC staff for productive collaboration. Alexandros Louka provided excellent research assistance. Finally, we are grateful to the three referees and the editor for insightful comments and suggestions that greatly improved the paper. This research has been co-funded by the European Union (European Social Fund—ESF) and the Greek Ministry of Education through the Operational Program “Education and Lifelong Learning” of the National Strategic Reference Framework (NSRF)—Research Funding Program: ΑRISTEIA-CoLEG.

Author information

Authors and Affiliations


Corresponding author

Correspondence to Yannis Katsoulacos.

Ethics declarations

Conflict of interest

The authors declare that they have no conflict of interest.

Additional information

Publisher’s Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.


Appendix 1

Tables 12, 13, 14, 15 and 16.

Table 12 Preliminary descriptive statistics—Leaders and Laggards
Table 13 OLS results—all countries
Table 14 OLS results—all countries
Table 15 OLS results—all countries
Table 16 OLS results—all countries

Appendix 2

According to the methodology by Buccirossi et al. (2011), the calculation of the medium-level indices requires the calculation of two indices—one covering the institutional features and the other the enforcement features—for each type of infringement (abuses, hard-core cartels and other agreements) and for mergers. The calculation of these eight medium-level indices is based on weighted averages of the low-level indices. Weights for these aggregations are presented in brackets in Table 17.

Table 17 Medium-level indices.

The high-level CPIs include four disaggregated indices—the Antitrust CPI, the Mergers CPI, the Enforcement CPI and the Institutional CPI—and the aggregate CPI. The construction of the high-level CPIs is based in weighted aggregations of the medium-level indices. Specifically, the Antitrust CPI is calculated through the weighted average of the six medium-level indices related to antitrust infringements, while the Mergers CPI of the two corresponding medium-level indices. The Institutional CPI is calculated through the weighted average of the four medium-level indices related to the institutional features and the Enforcement CPI of the other four related to the enforcement features. Combining these four disaggregated CPIs, we end up to the aggregate CPI. Weights for the construction of the high-level CPIs are presented in brackets in Table 18.

Table 18 The CPIs.

Rights and permissions

Reprints and Permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Benetatou, K., Katsoulacos, Y., Kyriazidou, E. et al. Competition policy and labor productivity growth: some new evidence. Empir Econ 58, 3035–3076 (2020).

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI:


JEL Classification