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Product and labour market imperfections in the Italian manufacturing sector: a firm-level analysis

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  • Jasmine Mondolo

    (Polytechnic University of Marche)

Abstract

Despite the extensive literature on product market power, evidence on markups at the firm level and which also accounts for labour market power is still limited. In this paper, we investigate the trends in both these market frictions in a large sample of Italian manufacturing firms over the period 2010–2018. In doing so, we devote particular attention to the factors underlying product market power, and especially to the way the markup is related to labour market power and the labour share of income. Our analysis reveals that, during the selected years, the manufacturing sector has experienced a limited rise in markups and a shift in labour market power away from firms and towards workers. These dynamics are mostly driven by within-firm changes. Additionally, the overall growth in bargaining power, which explains the muted positive trend in the labour share, is mainly ascribable to the rise in the average firm-level wages. However, the latter are likely to hide relevant inter-individual heterogeneity, as national data on wage inequality suggest, and monopsony power is still a widespread phenomenon, especially in the Mezzogiorno.

Suggested Citation

  • Jasmine Mondolo, 2022. "Product and labour market imperfections in the Italian manufacturing sector: a firm-level analysis," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(3), pages 813-838, October.
    • Handle: RePEc:spr:epolit:v:39:y:2022:i:3:d:10.1007_s40888-022-00280-w
    DOI: 10.1007/s40888-022-00280-w
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    More about this item

    Keywords

    Markup; Labour market power; Production function; Labour share;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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