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Measuring market power: macro- and micro-evidence from Italy

Author

Listed:
  • Emanuela Ciapanna

    (Bank of Italy - DG for Economics, Statistics and Research)

  • Sara Formai

    (Bank of Italy - DG for Economics, Statistics and Research)

  • Andrea Linarello

    (Bank of Italy - DG for Economics, Statistics and Research)

  • Gabriele Rovigatti

    (Bank of Italy - DG for Economics, Statistics and Research)

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 present a comparative study with respect to the other main Euro area countries, whereas the micro-level analysis focuses on the markup dynamics across and within Italian firms. According to our findings, (i) aggregate markups show flat/slightly decreasing dynamics across EU countries, settling to a 1.1 level on average; (ii) the aggregate dynamics hide substantial cross-sector and cross-firm heterogeneity; (iii) the within-firm component is the most relevant driver of markup dynamics; and (iv) no superstars-driven dynamics emerge: although firms with higher markups show slightly more variation over time, there is no evidence of an increasing trend. Finally, we compare our results with those obtained by De Loecker and Eeckhout (Global market power, National Bureau of Economic Research, Cambridge, 2018) and show that they differ mainly because our sample, including non-listed firms, is more representative of the EU corporate sectors. Our study has important policy implications: it warns against blindly extending the conclusions valid for specific contexts to others with different characteristics, while inviting a careful assessment of the actual competitive landscape, based on representative datasets and robust analyses.

Suggested Citation

  • Emanuela Ciapanna & Sara Formai & Andrea Linarello & Gabriele Rovigatti, 2024. "Measuring market power: macro- and micro-evidence from Italy," Empirical Economics, Springer, vol. 67(6), pages 2677-2717, December.
    • Handle: RePEc:spr:empeco:v:67:y:2024:i:6:d:10.1007_s00181-024-02624-w
    DOI: 10.1007/s00181-024-02624-w
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    Cited by:

    1. Diane Coyle & John McHale & Ioannis Bournakis & Jen-Chung Mei, 2023. "Recent Trends in Firm-Level Total Factor Productivity in the United Kingdom: New Measures, New Puzzles," Working Papers 036, The Productivity Institute.
    2. Bellocchi, Alessandro & Travaglini, Giuseppe, 2023. "Can variable elasticity of substitution explain changes in labor shares?," Journal of Macroeconomics, Elsevier, vol. 76(C).
    3. Ugur, Mehmet, 2024. "Innovation, market power and the labour share: Evidence from OECD industries," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    4. Kovacs, Oliver, 2024. "Exaptationary Industry 4.0: Graphene as pathfinder?," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    5. Diane Coyle & John McHale & Ioannis Bournakis & Jen-Chung Mei, 2024. "Converging to Mediocrity: Trends in Firm-Level Markups in the United Kingdom 2008-2019," Working Papers 047, The Productivity Institute.
    6. Gibbon, Alexandra J. & Schain, Jan Philip, 2023. "Rising markups, common ownership, and technological capacities," International Journal of Industrial Organization, Elsevier, vol. 89(C).

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    More about this item

    Keywords

    Markups; Competition measures; Euro area; Micro–macro-data;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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