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Changing institutions in the European market: the impact on mark-ups and rents allocation

Author

Listed:
  • Antonio Bassanetti

    (Bank of Italy)

  • Roberto Torrini

    (Bank of Italy)

  • Francesco Zollino

    (Bank of Italy)

Abstract

We investigate whether the completion of the Single Market Programme has enhanced competition on the product markets across European countries, taking into account the companion structural reforms undertaken by the member countries, particularly in the labour market and the institutional setting of important industries (i.e. network industries). We test for a break in both mark-ups and the division of rent between capital and labour based on a statistical model incorporating efficient bargaining in the labour market. Using industry data for ten EU countries we find that, without controlling for changes in the rent sharing, mark-up estimates tend to increase in the 1990s. However, once we assume efficient bargaining in the labour market, mark-ups remain virtually unchanged or, in some sectors or groups of countries, even decrease; this reflects the declining shares of rents accruing to workers as a result of their diminished bargaining power. The evidence is particularly strong for high and medium-tech manufacturing, for construction and for those activities that went through deep institutional changes and privatization programmes.

Suggested Citation

  • Antonio Bassanetti & Roberto Torrini & Francesco Zollino, 2010. "Changing institutions in the European market: the impact on mark-ups and rents allocation," Temi di discussione (Economic working papers) 781, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_781_10
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    References listed on IDEAS

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    Cited by:

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    2. Maurizio Zenezini, 2013. "Introduzione al tema. Promemoria delle riforme economiche," ECONOMIA E SOCIET? REGIONALE, FrancoAngeli Editore, vol. 0(2), pages 5-9.
    3. Ana Cristina Soares & João Amador, 2013. "Competition in the Portuguese Economy: Estimated Price-Cost Margins Under Imperfect Labour Markets," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    4. Elena Podrecca, 2013. "Riforme del mercato dei prodotti e crescita della produttivit?. Teoria ed evidenza empirica," ECONOMIA E SOCIET? REGIONALE, FrancoAngeli Editore, vol. 0(2), pages 10-41.
    5. Jasmine Mondolo, 2021. "Macroeconomic dynamics and the role of market power. The case of Italy," DEM Working Papers 2021/17, Department of Economics and Management.
    6. Mondolo, Jasmine, 2020. "Macro and microeconomic evidence on investment, factor shares, firm and labor dynamics in Italy and in Trentino," MPRA Paper 99138, University Library of Munich, Germany.
    7. Maurizio Zenezini, 2013. "Riforme e crescita in Italia: una nota," ECONOMIA E SOCIET? REGIONALE, FrancoAngeli Editore, vol. 0(2), pages 97-113.
    8. João Amador & Ana Cristina Soares, 2017. "Markups and bargaining power in tradable and non-tradable sectors," Empirical Economics, Springer, vol. 53(2), pages 669-694, September.
    9. Claire Giordano & Francesco Zollino, 2017. "Macroeconomic estimates of Italy's mark-ups in the long-run, 1861-2012," Quaderni di storia economica (Economic History Working Papers) 39, Bank of Italy, Economic Research and International Relations Area.
    10. Alessandro Mistretta & Francesco Zollino, 2021. "Recent Trends in Economic Activity and TFP in Italy with a Focus on Embodied Technical Progress," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(1), pages 79-107, March.
    11. Ana Cristina Soares, 2020. "Price-cost margin and bargaining power in the European Union," Empirical Economics, Springer, vol. 59(5), pages 2093-2123, November.
    12. Mondolo, Jasmine, 2021. "Macroeconomic dynamics and the role of market power. The case of Italy," MPRA Paper 110172, University Library of Munich, Germany, revised 05 Oct 2021.
    13. Carlos Figueira & Ricardo Pinheiro-Alves, 2023. "Evolution of price-cost margins during the troika intervention," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 22(3), pages 315-351, September.

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    More about this item

    Keywords

    institutional changes; mark-up; rent-sharing;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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