Regulation, Trade and Productivity in Romania : An Empirical Assessment

• Main Authors: De Rosa, Donato, Iootty, Mariana, Pirlea, Ana Florina
• Format: Publication
• Language: English
• Published: World Bank, Washington, DC 01.06.2013
• Subjects: ACCOUNTING; aggregate productivity; AGRICULTURE; AIR; AIR TRANSPORT; ALLOCATIVE EFFICIENCY; BASIC METALS; BENCHMARK; BEST PRACTICE; BUSINESS ACTIVITIES; BUSINESS ENTRY; BUSINESS ENVIRONMENT; BUSINESS OPERATIONS; COAL; COMPUTERS; cross-country output convergence; DEVELOPMENT POLICY; DIVIDENDS; ECONOMIC GROWTH; ECONOMICS; ELECTRICITY; EMPIRICAL STUDIES; EXPORTS; FISHING; FORESTRY; FUEL; GDP; GLOBAL ECONOMY; GROSS DOMESTIC PRODUCT; GROWTH POTENTIAL; HUMAN CAPITAL; ICT; INCOME; INNOVATION; INSTITUTIONAL FRAMEWORK; INTERMEDIATE GOODS; INTERNATIONAL TRADE; LABOR FORCE; LABOR PRODUCTIVITY; LAND TRANSPORT; LOGGING; MANUFACTURING; MOTOR VEHICLES; NEW TECHNOLOGIES; OIL; OPEN ACCESS; PETROLEUM PRODUCTS; POLICY ENVIRONMENT; POLITICAL ECONOMY; POSITIVE EFFECTS; PRIVATE SECTOR; PRIVATE SECTOR DEVELOPMENT; PRODUCTION PROCESS; PRODUCTIVITY GROWTH; PROPERTY RIGHTS; RADIO; RECYCLING; regulation; REGULATORY ENVIRONMENT; REGULATORY FRAMEWORK; RESULTS; RETAIL SALE; RETAIL TRADE; TECHNOLOGICAL CHANGE; TECHNOLOGY TRANSFER; TECHNOLOGY TRANSFERS; TELECOMMUNICATIONS; TELEVISION; TRANSPORT; TRANSPORT ACTIVITIES; TRANSPORT EQUIPMENT; TRANSPORT RESEARCH; USERS; VALUE ADDED; WEB

Inappropriate regulation can influence productivity performance by affecting incentives to invest and adopt new technologies, as well as by directly curbing competitive pressures. Results of a labor productivity growth model for European countries suggest that improving the regulatory environment -- proxied by the Worldwide Governance Indicators regulatory quality indicator -- and boosting effective exposure to competition through increasing trade integration -- expressed as the ratio of exports plus imports to gross domestic product -- have positive effects on productivity growth. In Romania a 10 percent increase in openness to global trade over 1995-2010 would have boosted productivity growth by 9.7 percent per year. A 10 percent increase in openness to European Union trade, in particular, would have led to an annual increase in productivity of 7 percent. Realizing the benefits from trade integration depends to some extent on regulation. In this regard, the effects of regulation on productivity growth are found to be positive, regardless of the indicator used to measure regulation, and both through direct and indirect channels (by increasing the speed at which a country catches up with productivity leaders). Simulation results also show how countries with different levels of regulatory quality would benefit from a regulatory improvement: had Romania improved its regulatory environment to the same level as Denmark in 2010, its annual productivity growth would have been 14 percent higher over 1995-2010.