Discussion paper

DP11799 Regulatory harmonization, profits, and productivity: Firm-level evidence from Morocco

This paper combines a new database on non-tariff measures (NTMs) with Morocco’s firm census to explore the effect of regulatory harmonization with the E.U. on firm-level outcomes. Exploiting cross-sectoral variation in the timing and extent of regulatory harmonization, we find that harmonization waves correlate with rises in labor productivity and with higher markups, allowing self-financing of the adaptation process at the firm level. We identify an induced market-structure change that made the observed rise in markups possible. Namely, harmonization temporarily sheltered the Moroccan market from competition from low-end producers in other developing countries, who took time to adapt. We identified this effect through changes in both trade patterns and firm-level outcomes. Thus, harmonization apparently generated a self-financing adaptation process by affecting both firm-level incentives and market structure.

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Citation

Cadot, O, P Augier and M Dovis (2017), ‘DP11799 Regulatory harmonization, profits, and productivity: Firm-level evidence from Morocco‘, CEPR Discussion Paper No. 11799. CEPR Press, Paris & London. https://cepr.org/publications/dp11799