Data: 26/02/2010 - 12.30-14.30

Autore: Roberto Torrini - Banca d’Italia

Abstract: In this paper we test for the hypothesis that the EU’s Single Market Programme have affected firms mark-ups over marginal costs. Since the Single Market Programme went hand in hand with structural reforms in the labour market and in the institutional setting of important industries (i.e. network industries), we explicitly control for a simultaneous break in the markups and rent sharing between capital and labour. This was done by encompassing both in the theoretical and in the empirical models the hypothesis of efficient bargaining in the labour market. By using industry data for 10 EU countries, we find that without controlling for rent sharing, at the aggregate level mark-up estimates tend to increase in the 1990s. However, once we assume efficient bargaining in the labour market, mark-ups remain virtually unchanged while the share of rents which goes to workers declines. Without controlling for this, a rise in firm profitability due to rent reallocation could be wrongly interpreted as an increase in firms market power. At the sector level this is particularly clear for those industries which went through deep institutional changes and privatisation programmes. In the last part of the paper we tentatively use our results to purge TFP estimates from imperfect competition and rent sharing for Italy and Spain. These countries in the last 10 years experienced a disappointing productivity performance with respect to the past: at least for Italy our preliminary results seem to provide part of the explanation for this evidence.
Key words: competition policy, imperfect competition, rent sharing, productivity
JEL codes: D4, J5, L1.