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Natural disasters and markups

Author

Listed:
  • Francesco Paolo Conteduca

    (Bank of Italy)

  • Ludovic Panon

    (Bank of Italy)

Abstract

Can firm-level markup adjustments affect the aggregate cost of large, localized shocks? Using firm-level data from Italy, we show that natural disasters lead to a persistent decline in markups among affected manufacturing firms. We apply an oligopolistic competition model with idiosyncratic shocks directly to firm-level data and invert it to recover productivity for firms impacted by the 2012 Northern Italy earthquake. We then quantify how markup adjustments shape aggregate manufacturing productivity and welfare. Our baseline results suggest that markup changes amplified the aggregate productivity and welfare losses of the earthquake by approximately 20%.

Suggested Citation

  • Francesco Paolo Conteduca & Ludovic Panon, 2025. "Natural disasters and markups," Temi di discussione (Economic working papers) 1496, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1496_25
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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