Economic development and the growth of the trade sector in Italy

Abstract

The growing gap between wholesale and retail prices, coupled with the increase of nearly one-third in the number of retail establishments, suggests that Italy’s economic development in the 1950s was accompanied by a marked and costly increase in excess capacity in retailing. The present work argues that any excess capacity may have already declined and the proportion of the work force in retail trade can be expected to increase even if excess capacity is gradually eliminated. Furthermore, over the long run, distribution costs are almost certain to increase. In order to minimize such costs and comply with the Treaty of Rome, entry restrictions on large-scale retailing should be removed. The author concludes that the growth of large scale retailing is desirable not only because it can invigorate price competition, but also because it can play an active role in accelerating the economic development of the primary and secondary sectors of the economy.