This part of growth, commonly
labelled "multi-factor productivity, represents improvements in the
efficiency of production. It is usually seen as the result of
innovation by best-practice firms, technological catch-up by other
firms, and reallocation of resources across firms and industries."
The study analyzed the entire OECD area. It concluded, unsurprisingly,
that easing regulatory restrictions enhances productivity and that
policies that favor competition spur innovation. They do so by making
it easier to adjust the factors of production and by facilitating the
entrance of new firms - mainly in rapidly evolving industries.
Pro-competition policies stimulate increases in efficiency and product
diversification. They help shift output to innovative industries. More
unconventionally, as the report diplomatically put it: "The effects on
innovation of easing job protection are complex" and "Excessive
intellectual property rights protection may hinder the development of
new processes and products."
As expected, the study found that productivity performance varies
across countries reflecting their ability to reach and then shift the
technological frontier - a direct outcome of aggregate innovative
effort.
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