Natural disasters and markups

Francesco Paolo Conteduca () and Ludovic Panon ()
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Francesco Paolo Conteduca: Bank of Italy
Ludovic Panon: Bank of Italy

No 1496, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Can firm-level markup adjustments affect the aggregate cost of large, localized shocks? Using firm-level data from Italy, we show that natural disasters lead to a persistent decline in markups among affected manufacturing firms. We apply an oligopolistic competition model with idiosyncratic shocks directly to firm-level data and invert it to recover productivity for firms impacted by the 2012 Northern Italy earthquake. We then quantify how markup adjustments shape aggregate manufacturing productivity and welfare. Our baseline results suggest that markup changes amplified the aggregate productivity and welfare losses of the earthquake by approximately 20%.

Keywords: natural disasters; markups; oligopolistic competition; aggregate productivity; misallocation; firm heterogeneity (search for similar items in EconPapers)
JEL-codes: D22 D43 L13 O47 Q54 (search for similar items in EconPapers)
Date: 2025-10
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1496_25

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