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Though the theory of irreversible investment under uncertainty is now well understood, no attempt has been made to empirically evaluate its predictions for foreign investment decisions. Yet costs of entry and exit from financial markets due to government restrictions certainly represent an important source of irreversibility. In this paper, a model with partial irreversibility of investment is used to derive a negative relation between costs of entry and exit from financial markets and foreign investment. Such a theoretical relation is consistent with empirical findings from a panel of 25 developing countries in 1987-91.

This article reports estimates of the impact of service regulation reform on the productivity of French and Italian firms in retail, transports and professional services over the period 1998-2007. We implement a two-stage least squares estimation: the first-stage instruments mark-ups, a financial measure of rents, with barriers to entry and the second stage estimates the impact of instrumented mark-ups on total factor productivity ( TFP), a real measure of firm efficiency. We find that entry barriers lower firm productivity by raising mark-ups and rents. These estimates imply that, if French and Italian regulators had adopted the OECD best practices in terms of entry barriers, firms in these sectors would have increased their TFP level by five percentage points. We do not find any robust evidence of a non-linear relation between mark-up and productivity. [ABSTRACT FROM AUTHOR]

We study the relation between the off-shoring of intermediates and services and productivity growth in the Italian manufacturing industries in 1995–2003. Our results indicate that the off-shoring of intermediates within the same industry (“narrow off-shoring”) is beneficial for productivity growth, while the off-shoring of services is not. We also find that the way in which off-shoring is measured may matter considerably. The positive relation between off-shoring of intermediates and productivity growth is there with our direct measures based on input–output data but disappears when either a broad measure or the Feenstra–Hanson off-shoring measure employed in other studies are used instead. (JEL codes: F16, F23, 04) [ABSTRACT FROM PUBLISHER]

In this paper we study the geography of the IT revolution in the U.S. economy. By relating the intensity of IT production and diffusion to labor productivity growth for the United States, we find three main results. First, states with above-average production intensity of IT manufacturing show more growth acceleration than other states. Second, the same applies to states with above-average IT diffusion. Yet, while the result for IT-producing states is strong, the result for IT-using states is somewhat smaller and less robust across specifications. Third, we also reconcile our state-wide pieces of evidence with previous industry and aggregate evidence. Accelerating productivity growth in IT-producing states stems from both IT-producing and IT-using industries in those states and is not a manifestation of the exclusive importance of IT production. Moreover, the less robust evidence for IT-using states is due to lower growth contributions from IT-producing and other industries in these states, not a symptom of a missing effect of IT usage. [ABSTRACT FROM AUTHOR]

This paper explores the quantitative plausibility of three candidate explanations for the European productivity slowdown with respect to the US. The empirical plausibility of the common wisdom on the topic (the "IT usage" hypothesis) is found to crucially depend on how IT-using industries are defined. If a narrow definition is chosen, the IT usage hypothesis no longer explains the whole of the EU productivity slowdown but just about 55 percent of it, with the remaining part to be attributed to other factors than IT, as argued in the "IT irrelevance" view. No room is left for IT-producing industries as another potential vehicle for the US-EU productivity growth gap, instead. [ABSTRACT FROM AUTHOR]