Natural Disasters and Markups

Francesco Conteduca and Ludovic Panon

MPRA Paper from University Library of Munich, Germany

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, especially for high-productivity ones. We implement an oligopolistic competition model with idiosyncratic shocks directly on 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 O47 Q54 (search for similar items in EconPapers)
Date: 2024-12-17
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https://mpra.ub.uni-muenchen.de/125324/1/MPRA_paper_123008.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/125324/3/MPRA_paper_125324.pdf original version (application/pdf)

Related works:
Working Paper: Natural Disasters and Markups (2024)
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