Macroeconomic Estimates of Italy's Mark-Ups in the Long-Run, 1861-2012

Abstract

We explore three alternative methodologies drawn from economic history literature to compute macroeconomic total-economy estimates of Italyi?½s mark-ups since 1861, based on the new historical national accounts presented in Baffigi (2013) and Giordano and Zollino (2015). Two key features of Italyi?½s history stand out: a) the increase in market power under the Fascist regime and b) the strengthening of competition since 1993. We then focus on a more limited time span (1970-2012) in order to estimate sectorial mark-ups using the model developed in Bassanetti, Torrini and Zollino (2010). Employing Istat and EU-KLEMs data, we find evidence of a reduction in mark-ups after the completion of the Single Market, with an acceleration after the inception of the European Monetary Union, owing mostly to the decrease in workersi?½ bargaining power rather than in firmsi?½ margins. Moreover, we find large heterogeneity in mark-ups across sectors, with regulated services displaying weaker competition than manufacturing and market services.