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Nordic Economic Policy Review

Productivity and competitiveness

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The Nordic Economic Policy Review is published by the Nordic Council of Ministers and addresses policy issues in a way that is useful for in-formed non-specialists as well as for professional economists. All articles are commissioned from leading professional economists and are subject to peer review prior to publication. The review appears twice a year. The journal is distributed free of charge to the members of the Nordic economic associations. The easiest way to subscribe to the NEPR is therefore to become a member of one of these associations, i.e., Denmark: Nationaløkonomisk Forening Finland: Taloustieteellinen Yhdistys Norway: Samfunnsøkonomene Sweden: Nationalekonomiska Föreningen. For institutional subscriptions, please contact [email protected] Content: The widening productivity gap between the EU and the US: An introduction to the conference on productivity and competitiveness - Jakob B. Madsen and Anders Sørensen Up the hill and down again: A history of Europe’s productivity gap relative to the United States, 1950-2009 - Bart van Ark Comment by Matti Pohjola Regulation, resource reallocation and productivity growth - Jens Matthias Arnold, Giuseppe Nicoletti and Stefano Scarpetta Comment by Mika Maliranta Human capital and productivity - Angel de la Fuente Comment by Pekka Ilmakunnas Productivity and international firm activities: What do we know? - Joachim Wagner Comment by Markku Stenborg Innovation and productivity - Bronwyn H. Hall Comment by Ari Hyytinen A personnel economics approach to productivity enhancement - Edward P. Lazear and Kathryn L. Shaw Comment by Tuomas Pekkarinen Productivity and education: Benchmarking of elementary and lower secondary schools in Denmark - Peter Bogetoft and Jesper Wittrup Comment by Timo Kuosmanen

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Comment on Arnold, Nicoletti and Scarpetta: Regulation, resource allocation and productivity growth

This paper addresses a topic that is both interesting and of utmost importance: how can policymakers raise the productivity level of a nation? Many agree with Paul Krugman’s (1997) famous assertion that in the long run, productivity “is almost everything”: it is the key driver of long-term economic growth and thereby, it is essential for the subjective well-being of citizens (see Sacks et al., 2010). In fact, multi-factor productivity (MFP), which measures the efficiency of total input use, is arguably a more ideal indicator of welfare than per capita output (Hulten, 2001). From a policy perspective, it is crucial to note that MFP can increase via two fundamentally different channels: 1) technical change (or productivity growth within plants/firms) and 2) the reallocation of inputs to those firms (and plants) that can use them more efficiently.

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