Measuring market power: macro and micro evidence from Italy

Emanuela Ciapanna, Sara Formai (), Andrea Linarello and Gabriele Rovigatti
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Sara Formai: Bank of Italy

No 672, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In this paper, we provide an assessment of the evolution of markups in Italy in the last twenty years. To this aim, we resort to both macro and micro data and estimation techniques, namely reduced forms accounting measures (price-cost margins) and production function model-based indicators. When using aggregate data, we adopt a comparative approach and analyse markup dynamics in the four main euro area countries, whereas the micro-level analysis is focused on Italy. According to our findings i) markups have shown flat/slightly decreasing dynamics in the last decades in the major EU countries, settling on average in level at 1.1; ii) aggregate dynamics hide substantial across sector and firms heterogeneity in markups patterns; iii) the micro-level analysis for Italy indicates the within-firms component as the most relevant in explaining markups behavior; iv) no top firms-driven dynamics emerge; v) our evidence conflicts with the results obtained in De Loecker and Eeckhout (2018) because the latter suffers of two main sources of bias: a strong sample selection, and the assumption of a common technology parameter across countries. Finally, we propose an encompassing measure of market power, summarizing the several indices investigated in a principal component framework. This synthetic indicator describes the markups evolution for the Italian economy and we confirm its effectiveness based on a set of validation variables.

Keywords: Markups; competition measures; Euro Area; micro-macro data (search for similar items in EconPapers)
JEL-codes: D2 D4 E2 L1 O3 (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-com, nep-cwa, nep-eec, nep-mac and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: Measuring market power: macro- and micro-evidence from Italy (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_672_22

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