Macro and microeconomic evidence on investment, factor shares, firm and labor dynamics in Italy and in Trentino

In recent years, a number of papers have attempted to shed light on some macroeconomic dynamics in a few countries, especially in the US, which raise some concerns and which may be influenced by variations in corporate market power. This study mainly aims to understand how and to what extent Italy differs from other economies in terms of these trends, and whether there are relevant within-country differences. Specifically, we first look at the trends, based on aggregate data, of domestic investment rate, labor share and capital share, labor force participation, wage dispersion and economic dynamism, observed in Italy since the mid-nighties, and make some comparisons with the US and the EU. Then, since national data may hide relevant within-country heterogeneity, when possible, we split Italy in four macro-areas. Further, we focus on a specific Italian region, namely Trentino, for which we also recover the trends in private investment rate, factor shares and profit share, for the years 2009-2015, using a firm-level dataset compiled by Ispat. The main results of this study are as follows: the macroeconomic trends under scrutiny observed in Italy since the second half of the nineties partly diverge from those emerged in the US. In particular, labor share presents a mixed trend during the selected time period, domestic investment has been recovering after the contraction occurred in the aftermath of the economic recession, and labor force participation exhibits a clear average positive trend. In addition, the overall picture hides considerable within-country heterogeneity (more in terms of levels than in terms of trends). For instance, labor force participation is still sensibly lower in the Mezzogiorno than in the rest of the country. As for Trentino, this region exhibits a relatively high level of investment rate, a relatively small wage dispersion (proxied by the Gini coefficient) in recent years and, in most of the years since 2002, a net turnover rate of firms which is higher than the average national one.