How does entry affect productivity growth of incumbents? In this paper we exploit policy reforms in the United Kingdom that changed entry conditions by opening up the U.K. economy during the 1980s and panel data on British establishments to shed light on this question. We show that more entry, measured by a higher share of industry employment in foreign firms, has led to faster total factor productivity growth of domestic incumbent firms and thus to faster aggregate productivity growth.
Authors
Richard Blundell
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Rachel Griffith
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Philippe Aghion
Philippe is an IFS Research Fellow, a Professor of Economics at LSE, at the College de France and at INSEAD, and a Fellow at the Econometric Society.
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