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Firm Size Distribution: Testing the "Independent Submarkets Model" in the Italian Motor Insurance Industry

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  • Luigi Buzzacchi
  • Tommaso Valetti

Abstract

This paper tests the presence of multiple independent submarkets in the Italian motor insurance industry. Independence is motivated by administrative boundaries among provinces and by further locational reasons. We find that the independence effects are sufficient to induce a minimum degree of inequality in the size distribution of firms once submarkets are aggregated. These results are fully consistent with the predictions of Sutton (1998). We also show that the degree of skewness in the firms size distribution is related to characteristics such as the population living in an area, its density and the riskiness of a submarket.

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File URL: http://sticerd.lse.ac.uk/dps/ei/ei24.pdf
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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Economics of Industry Papers with number 24.

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Date of creation: Sep 1999
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Handle: RePEc:cep:stieip:24

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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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Keywords: Size distribution of firms; independent submarkets; insurance companies;

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References

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  1. Dahlby, Bev & West, Douglas S, 1986. "Price Dispersion in an Automobile Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 418-38, April.
  2. Franco Mariuzzo & Patrick Walsh & Ciara Whelan, 2003. "Firm Size and Market Power in Carbonated Soft Drinks," Review of Industrial Organization, Springer, vol. 23(3), pages 283-299, December.
  3. Barron, John M. & Taylor, Beck A. & Umbeck, John R., 2004. "Number of sellers, average prices, and price dispersion," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1041-1066, November.
  4. Asplund, Marcus, 1998. "On the size distributions of firms and markets," Working Paper Series in Economics and Finance 288, Stockholm School of Economics.
  5. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
  6. Carlson, John A & McAfee, R Preston, 1983. "Discrete Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 480-93, June.
  7. Luigi Buzzacchi & Tommaso M. Valletti, 2004. "Firm Size Distribution in Small Samples," Bulletin of Economic Research, Wiley Blackwell, vol. 56(4), pages 301-309, October.
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Citations

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Cited by:
  1. Peter Thompson & Steven Klepper, 2003. "Submarkets and the Evolution of Market Structure," Working Papers 0303, Florida International University, Department of Economics.
  2. Patrick Paul Walsh & Ciara Whelan, 2001. "Product Differentiation and Firm Size Distribution - An Application to Carbonated Soft Drinks," Working Papers 200113, School Of Economics, University College Dublin.
  3. Tom Van Ourti & Philip Clarke, 2008. "The Bias of the Gini Coefficient due to Grouping," Tinbergen Institute Discussion Papers 08-095/3, Tinbergen Institute.
  4. Giannetti, C., 2008. "Intensity of Competition and Market Structure in the Italian Banking Industry," Discussion Paper 2008-43, Tilburg University, Center for Economic Research.
  5. Kattuman, P. & Roberts, B.M., 2000. "Strategy Choices of Firms and Market Concentration'," Cambridge Working Papers in Economics 0018, Faculty of Economics, University of Cambridge.
  6. John Hutchinson & Jozef Konings & Patrick Paul Walsh, 2009. "The Firm Size Distribution and Inter-Industry Diversification," Working Papers 200926, Geary Institute, University College Dublin.
  7. Tom Van Ourti & Philip Clarke, 2008. "The Bias of the Gini Coefficient due to Grouping," Tinbergen Institute Discussion Papers 08-095/3, Tinbergen Institute.
  8. John Hutchinson, 2003. "Is there a Lower Bound to the Firm Size Distribution Comparing Transition Economies with an Established Market Economy," LICOS Discussion Papers 13503, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  9. Franco Mariuzzo & Patrick Walsh & Ciara Whelan, 2003. "Firm Size and Market Power in Carbonated Soft Drinks," Review of Industrial Organization, Springer, vol. 23(3), pages 283-299, December.
  10. Patrick Paul Walsh & Ciara Whelan, 2002. "Portfolio Effects and Firm Size Distribution - Carbonated Soft Drinks," The Economic and Social Review, Economic and Social Studies, vol. 33(1), pages 43-54.
  11. Silvana Robone & Alberto Zanardi, 2006. "Market structure and technology: evidence from the Italian National Health Service," International Journal of Health Care Finance and Economics, Springer, vol. 6(3), pages 215-236, September.
  12. John Sutton, 2001. "Rich Trades, Scarce Capabilities: Industrial Development Revisited," STICERD - Economics of Industry Papers 28, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  13. Maria Letizia Giorgetti, 2001. "Quantile Regression in Lower Bound Estimation," STICERD - Economics of Industry Papers 29, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

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