Regulations and technology gap in Europe: The role of firm dynamics

摘要

In this paper, we develop a new firm-level measure of distance to the productivity frontier that accounts for international technology spillovers stemming from the use of imported intermediate goods. The trade-weighted technological distance to frontier is matched with sector- and country-level data on regulation and firm dynamics (entry and exit rates) of 16 European countries. Using our measure of trade-adjusted technology gap, we investigate the role of labour, capital, and product market regulatory frameworks in the technology catch-up process, gauging the effect of firms' dynamics in mediating and moderating the impact of regulation on the technology gap.