In addition to trade related policies, the significance of other policies and regulations in determining productivity growth across countries or across industries in a country is studied in the literature. Some of them are strengthening private governance (privatization), promoting competition, opening up firms to access to markets, regulating capital spending and FDI, regulating slack, technology diffusion and adoption, innovation. For example, Arnold, Nicolette, and Scarpetta (2008) show that pro‐competitive regulations improve investment and multi‐ factor productivity, in turn, economic growth in selected OECD countries. The focus is basically on the regulations related to 1) privatization; 2) entry and price liberalization; 3) precompetitive regulation of natural monopolies; 4) liberalization of international trade and FDI. They point out that the timing and magnitude of regulations and policy changes are important factors to achieve higher productivity and growth. Eslava, Haltiwanger, Kugler, and Kugler (2004) study the effects of structural reforms on productivity and profitability enhancing reallocation, using a plant‐level longitudinal dataset for Colombia for the period 1982‐1998. They find that market reforms rising overall productivity is largely due to reallocation away from low towards high‐ productive plants; reallocation activities depend less on demand factors after reforms; the rise in aggregate productivity post‐reform is entirely accounted for by the improved allocation of activity.

The possible sources of differences in productivity levels across countries are investigated extensively in the literature, as explained above. In a parallel literature, researchers try to answer the question of how quickly productivity levels are converging across countries or across industries in a country. These analyses are important to evaluate the relative success of the changes leading to productivity gains. Some of the recent papers investigating differences in productivity and convergence across countries are Bartelsman, Haskel, and Martin (2008) and Bartelsman, Haltiwanger, and Scarpetta (2008). Bartelsman, Haskel, and Martin (2008) focus on developed countries and show that productivity levels are quite diverged. Bartelsman, Haltiwanger, and Scarpetta (2008) use harmonized firm‐level database that covers 24 industrial and emerging economies, including Argentina, Brazil, Chile, Colombia, Mexico, Venezuela, Indonesia, South Korea. They show that there is a significant heterogeneity in firm productivity and firm size. They calculate the correlation between market share of firms and productivity in different industries across different countries and show that larger firms are more efficient.

Section 1 describes the microeconomic theory of firm and the methodology of growth regressions and growth accounting framework, section 2 details the microeconomic and macroeconomic data used in this paper, while section 3 provides a summary of estimates and compares and contrasts the contribution of factors to output growth at micro and macro levels based on regressions and a growth accounting exercise for 45 countries for the period 2002‐05. Section 4 examines the determinants of TFP level focusing on Brazil and India for which enough data are available at the firm and industry level, 6