The trade effects of product market regulation in global value chains: evidence from OECD and BRICS countries between 2000 and 2015

Abstract

Global Value Chains (GVC) have reshaped the landscape of international trade. The quality and intensity of regulation significantly impacts firms' competitiveness and their ability to engage in GVC. Economic literature suggests that regulation of product market competition has a detrimental effect on trade by decreasing productivity, innovation, and economic growth. This paper expands existing knowledge on this relationship by examining the influence of product market regulation (PMR) on value-added trade flows in an augmented gravity model. We constructed a data panel with trade data from 40 OECD and BRICS countries in the period from 2000 to 2015 and combined it with an extensive multi-level indicator set on PMR developed by the OECD.