Massimo Del Gatto

Openness to Trade and Industry Cost Dispersion: Evidence from a Panel of Italian Firms

We use Italian firm-level data to investigate the impact of trade openness on the distribution of firms across marginal cost levels. In so doing, we implement a procedure that allows us to control not only for the standard transmission bias identified in firm-level TFP regressions but also for the omitted price bias due to imperfect competition. We find that more open industries are characterized by a smaller dispersion of costs across active firms. Moreover, in those industries the average cost is also smaller.

Trade Integration, Firm Selection and the Costs of Non-Europe

In models with heterogeneous firms trade integration has a positive impact on aggregate productivity through the selection of the best firms as import competition drives the least productive ones out of the market. To quantify the impact of firm selection on productivity, we calibrate and simulate a multi-country multi-sector model with monopolistic competition and variable markups using firm-level data and aggregate trade figures on a panel of 11 EU countries. We find that EU trade has a sizeable impact on aggregate productivity. In 2000 the introduction of prohibitive trade barriers would have caused an average productivity loss of roughly 13 per cent, whereas a reduction of intra-EU trade costs by 5 per cent would have generated a productivity gain of roughly 2 per cent. Productivity losses and gains, however, vary a lot across countries and sectors depending on market accessibility and trade costs. We provide evidence that our results are robust to alternative distance and productivity measures.

Productivity and Firm Selection: Quantifying the ‘New’ Gains from Trade

We discuss how standard computable equilibrium models of trade policy can be enriched with selection effects. This is achieved by estimating and simulating a partial equilibrium model that accounts for a number of real world effects of trade liberalisation: richer availability of product varieties; tougher competition and weaker market power of firms; better exploitation of economies of scale; and, of course, efficiency gains via firms selection. The model is estimated on EU data and then simulated in counterfactual scenarios. Gains from trade are much larger in the presence of selection effects with substantial variability across countries and sectors.

Unbundling Technology Adoption and TFP at the Firm Level - Do Intangibles Matter?

We use a panel of European firms to investigate the relationship between intangible assets and productivity. We disentangle between tfp and technology adoption, while available studies so far have considered only a notion of productivity conflating the two effects. To this aim, we estimate production function parameters allowing, within each sector, for the existence of multiple technologies. We find that intangible assets both push the firm towards better technologies (technology adoption effects) and allow for a more efficient exploitation of a given technology (tfp effects).

A Huff model with firm heterogeneity and selection. Application to the Italian retail sector

ABSTRACT In this paper, firm heterogeneity (in terms of productivity, i.e., marginal costs) is incorporated into a Huff model of competition in the Italian retail sector. A higher market potential in the trade area is associated with higher average productivity and lower productivity dispersion through selection of the best stores. The analysis, based on a unique data set encompassing 14,212 Italian retailers, finds support for this relationship in Southern Italy, but not in Northern and Central Italy (where opposite results are obtained in some cases), suggesting the selection dynamics are affected by context factors (other than provincial/regional accessibility) related to an upper geographical scale. The results are robust to controlling for local context factors such as financial risk and floor size restrictions. Floor size restrictions are found to enhance selection.

Geography, cultural remoteness and the second nature of within-country economic development: do island regions lag behind?

ABSTRACT Geography, cultural remoteness and the second nature of within-country economic development: do island regions lag behind? Regional Studies. Using a unique dataset that encompasses island regions worldwide (76 regions) and all the other regions of the countries (22 countries) to which they belong (474 regions in total), we document that the within-country gross domestic product (GDP) per capita delay of island regions(on average –21.7% of their national mean), while not explained by regional (neither geographical nor cultural) distance to the (neither global nor local) frontier of economic development, i.e., remoteness, is associated with ‘second-nature’ regional factors (human capital and institutional quality) not specific to island regions. However, the condition of being an island is strongly associated with worst second-nature characteristics.