Identifying Service Market Reform Priorities in Italy

Identifying Service Market Reform Priorities in Italy
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Volume/Issue: Volume 2020 Issue 039
Publication date: February 2020
ISBN: 9781513529998
$18.00
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Topics covered in this book

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Finance , Labor , Service , WP , low-productivity firm , firm productivity , aggregate output , firm level , production function , service market reform , firm entry/exit barriers , markups , productivity , unproductive firm , inefficiently-subsidized firm , startup procedure , Labor productivity , Services sector , Competition , Wages

Summary

Italy’s labor productivity in market services has declined since 2000, underperforming manufacturing and peer European countries, especially in strongly regulated sectors. A model of monopolistic competition is used to identify which service sectors would benefit more from removing entry and/or exit barriers. Using Italian firm-level data, the paper finds that sectors with high markups, such as professional services, would primarily benefit from removing entry barriers. Sectors with a large mass of unproductive firms, such as retail, would instead benefit from removing exit barriers. Policy recommendations to improve efficiency are outlined in relation to the sectoral priorities identified in the data.