No. 39 - Macroeconomic estimates of Italy's mark-ups in the long-run, 1861-2012

We explore three alternative methodologies drawn from economic history literature to compute macroeconomic total-economy estimates of Italy’s mark-ups since 1861, based on the new historical national accounts presented in Baffigi (2013) and Giordano and Zollino (2015). Two key features of Italy’s 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 workers’ bargaining power rather than in firms’ margins. Moreover, we find large heterogeneity in mark-ups across sectors, with regulated services displaying weaker competition than manufacturing and market services.