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Natural Disasters and Markups

Author

Listed:
  • Conteduca, Francesco Paolo
  • Panon, Ludovic

Abstract

Industries are not fully geographically concentrated, so that natural disasters can affect the degree of competition in the industry, forcing firms to adapt, and have aggregate consequences. Using administrative data, we show that natural disasters in Italy lead to a persistent decline in markups of affected manufacturing firms, particularly large ones. We implement an oligopolistic competition model with idiosyncratic shocks directly on the firm-level data and quantify how markup adjustments shape aggregate productivity and welfare. Our findings suggest that markup adjustments may have mitigated the impact of the 2012 Italian earthquake on aggregate productivity by approximately 30%.

Suggested Citation

  • Conteduca, Francesco Paolo & Panon, Ludovic, 2024. "Natural Disasters and Markups," MPRA Paper 123008, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:123008
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    File URL: https://mpra.ub.uni-muenchen.de/123008/1/MPRA_paper_123008.pdf
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    More about this item

    Keywords

    Natural Disasters; Markups; Oligopolistic Competition; Aggregate Productivity; Misallocation; Firm Heterogeneity;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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