MACROECONOMIC DYNAMICS AND THE ROLE OF MARKET POWER. THE CASE OF ITALY
Abstract
In recent years, the US and other advanced countries have experienced macroeconomic dynamics which raise some concerns and which, according to the literature, are at least partly attributable to a rise in product market power. This study mainly aims to understand how Italy performs in terms of five relevant economic variables (i.e., domestic investment rate, labour share, labour force participation, wage inequality and economic dynamism), and whether firms’ markups are on the rise. The picture that emerges is mixed, and the negative performance in terms of business dynamism and wage dispersion may be ascribable to an increase in product market power. The firm-level analysis of the Italian manufacturing sector for the years 2011-2018, which complements previous empirical analysis on product market power in this country and accounts for labour market power as well, reveals an increment in the average markup which, however, is not particularly pronounced and unsettling, and which is preceded by a period of steady decline. Moreover, this trend is accompanied by a more remarkable increase in the workers’ labour market power, which helps explain the modest growth in the revenue-based labour share observed during the same period.
References
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[4] Atkinson, A. and Piketty, T. 2009. Top Incomes in the Twentieth Century. Vol. II, Oxford University Press: Oxford, UK.
[5] Autor, D., et al. 2020. The Fall of the Labour Share and the Rise of Superstar Firms. The Quarterly Journal of Economics, 135(2): 645-709. DOI: https://doi.org/10.1093/qje/qjaa004
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[19] De Loecker, J. and Warzynski, F. 2012. Markups and Firm-Level Export Status. American Economic Review, 102(6): 2437-2471. DOI: 10.1257/aer.102.6.2437
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[31] Forni, L., Gerali, A. and Pisani, M. 2014. Macroeconomic effects of greater competition in the service sector: the case of Italy. Banca d’Italia Temi di Discussione (Working Papers), Working Paper No. 706.
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[34] Giordano, C. and Zollino, F. 2017. Macroeconomic estimates of Italy’s mark-ups in the long-run, 1861-2012. Banca d’Italia Economic History Working Papers, Working Paper No. 39.
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[36] Gutièrrez, G. 2018. Investigating Global Labour and Profit Shares. Society for Economic Dynamics’ s 2018 Meeting Papers, Meeting Paper No. 165. Available at: https://economicdynamics.org/meetpapers/2018/paper_165.pdf
[37] Gutièrrez, G. and Piton, S. 2020. Revisiting the global decline of the (non-housing) labour share. American Economic Review: Insights, 2(3): 321-338. Available at: http://germangutierrezg.com/GutierrezPiton2020_AERI_LaborShares.pdf
[38] Han, M. 2014. Rising Income Inequality and Competition: Evidence. KIEP Research Papers, Working Paper No. 14-03. DOI: http://dx.doi.org/10.2139/ssrn.2634311
[39] Han, M. and Pyun, J.H. 2021. Markups and income inequality: Causal links, 1975-2011. Journal of Comparative Economics, 49: 290-312. DOI: https://doi.org/10.1016/j.jce.2020.12.002
[40] Kaldor, N. 1957. A model of economic growth. Economic Journal, 67: 591-624.
[41] Karabarbounis, L. and Neiman, B. 2014. The Global Decline of the Labour Share. Quarterly Journal of Economics, 129(1): 61-103. DOI: https://doi.org/10.1093/qje/qjt032
[42] Karabarbounis, L. and Neiman, B. 2018. Accounting for Factorless Income. NBER Working Papers, Working Paper No. 24404. https://www.nber.org/system/files/working_papers/w24404/w24404.pdf
[43] Khan, L. and Vaheesan, S. 2017. Market Power and Inequality: The Antitrust Counterrevolution and Its Discontents. Harvard Law and Policy Review, 11: 235-294. Available at: https://harvardlpr.com/wp-content/uploads/sites/20/2017/02/HLP110.pdf
[44] Klette, T.J. 1999*. Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data. Journal of Industrial Economics, 47(4): 451-476. DOI:https://doi.org/10.1111/1467-6451.00108
[45] Koh, D., Santaeulàlia-Llopis, R. and Zheng, Y. 2020. Labour Share Decline and Intellectual Property Products Capital. Econometrica, 88(6): 2609-2628. DOI: https://doi.org/10.3982/ECTA17477
[46] Levinsohn, J. and Petrin, A. 2003*. Estimating Production Functions Using Inputs to Control for Unobservables. The Review of Economic Studies, 70(2): 317-341. DOI: 10.1111/1467-937X.00246
[47] Manyika, J., et al. 2019. A new look at the declining labour share of income in the United States. McKinsey Global Institute Discussion paper, May 2019.
[48] Mertens, M. 2019. Micro-mechanisms behind declining labour shares: Market power, production processes, and global competition. IWH-CompNet Discussion Papers, Working Paper 3/2019, Halle Institute for Economic Research (IWH). http://hdl.handle.net/10419/193167
[49] Mondolo, J. 2020. Macro and microeconomic evidence on investment, factor shares, firm and labor dynamics in Italy and in Trentino. SIS Working Papers, Working Paper No. 2020–2, School of International Studies (SIS), University of Trento. Available at: https://mpra.ub.uni-muenchen.de/99138/1/MPRA_paper_99138.pdf
[50] Nolan, B., Richiardi, M.G. and Valenzuela, L. 2019. The drivers of income inequality in rich countries. Journal of Economic Surveys, 33(4): 1285-1324.
[51] Olley, S. and Pakes, A. 1996*. The dynamics of productivity in the telecommunications equipment industry. Econometrica, 64: 1263-1297. DOI: https://doi.org/10.2307/2171831
[52] Perugini, C., Vecchi, M. and Venturini, F. 2017. Globalisation and the decline of the labour share: A microeconomic Perspective. Economic Systems, 41: 524-536. DOI:https://doi.org/10.1016/j.ecosys.2017.08.002
[53] Petrin, A. and Levinsohn, J. 2012*. Measuring aggregate productivity growth using plant-level data. RAND Journal of Economics, 43(4): 705-725. DOI:https://doi.org/10.1111/1756-2171.12005
[54] Rognlie, M. 2015. Deciphering the Fall and Rise in the Net Capital Share: Accumulation or Scarcity? Brookings Papers on Economic Activity, 1: 1-69. https://www.brookings.edu/wp-content/uploads/2016/07/2015a_rognlie.pdf
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Published
2022-12-31
How to Cite
MONDOLO, Jasmine.
MACROECONOMIC DYNAMICS AND THE ROLE OF MARKET POWER. THE CASE OF ITALY.
Theoretical and Practical Research in Economic Fields, [S.l.], v. 13, n. 2, p. 130 - 155, dec. 2022.
ISSN 2068-7710.
Available at: <https://journals.aserspublishing.eu/tpref/article/view/7467>. Date accessed: 20 apr. 2024.
doi: https://doi.org/10.14505/tpref.v13.2(26).03.
Section
Articles
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