The paper provides an assessment of the evolution of markups in Italy in the period between the mid-90s and right before the outbreak of the Covid crisis. Resorting to sectoral as well as firm-level data, we employ both reduced-form accounting measures (price-cost margins) and production function model-based indicators. We also propose an encompassing measure of market power, summarizing all previously studied indicators in a principal component framework.
We find that average markups in Italy showed flat dynamics, settling at around 10% of production costs. There is a great degree of heterogeneity across sectors and firms, with higher figures in services with respect to manufacturing, and for larger firms. We do not find increases in markups driven by superstar firms, differently from previously documented results for the United States.
