«Local development, urban economies and aggregate growth» with Antonio Accetturo (Bank of Italy, Research Unit, Trento), Sauro Mocetti (Bank of Italy, Research Department), and Paolo Sestito (Bank of Italy, Research Department), Questioni di economia e finanza, No. 490, 2019
Abstract: The aim of this paper is to present an overview of the results of a recent research project by the Bank of Italy. The paper analyses the interplay between historical origins, congestion costs, and agglomeration benefits in shaping the Italian urban system. It shows that urban agglomeration externalities (on wages, productivity, or innovation) tend to be smaller in Italy than in other developed countries; it also shows that the costs of congestion are relatively high and that high housing cost – explained by both physical constraints and public administration inefficiencies − discourage mobility. These features have a relevant impact on the development of an advanced urban system with possible negative consequences on the country’s ability to grow.
«Italian cities: definitions, characteristics and growth» with Andrea Petrella (Bank of Italy, Research Department), Questioni di economia e finanza No. 454, 2018
Abstract: This work describes the features of Italian urban areas, along with their evolution in terms of occupied area, population and levels of economic activity. Special emphasis is placed on the productivity advantage displayed by cities with respect to non-urban areas. Since the 1980s, Italian cities have increased in size, both in economic terms and in terms of occupied area, absorbing a growing number of municipalities. They display a more pronounced concentration of high-skilled workers, innovative activities and knowledge-intensive services. Compared to non-urban areas, cities have a 3 percent higher labor productivity in services, even net of observable characteristics regarding the local production structure and labor markets.
«An anatomy of Italian cities: Evidence from firm level data», with Andrea Petrella (Bank of Italy, Research Department), Questioni di economia e finanza No. 362, 2016
Abstract: Economic activity is concentrated in urban areas and during the 20th century the urban population grew at a faster rate than the national average in many countries. Why is this the case? In this paper we focus on the urban premium in firms’ productivity. We run two exercises. First, we document an urban premium in the level of firms’ productivity and we inspect its determinants among both firm and city characteristics. Second, we corroborate the evidence on the determinants of the urban productivity gap, studying the heterogeneity in productivity across urban and non-urban areas by means of a Blinder–Oaxaca decomposition. The results point to a sizable urban productivity premium, mostly explained by firm size and by some characteristics of urban areas, in particular the average levels of educational attainment and labor market participation.
«Free trade agreements and firm-product markups in Chilean manufacturing», with Andrea Linarello (Bank of Italy, Research Department and UPF) and Frederic Warzynski (Aarhus University), Aarhus University Economics Working Papers 2014-16, 2014
Abstract: In this paper, we use detailed information about firms’ product portfolio to study how trade liberalization affects prices, markups and productivity. We document these effects using firm product level data in Chilean manufacturing following two major trade agreements with the EU and the US. The dataset provides information about the value and quantity of each good produced by the firm, as well as the amount of exports. One additional and unique characteristic of our dataset is that it provides a firm-product level measure of the unit average cost. We use this information to compute a firm-product level measure of the profit margin that a firm can generate. We find that new products start being sold on foreign markets as export tariff fall. Moreover, for those products, we observe a fall in both prices and unit average costs. Those effects are mainly driven by an increase in productivity at the firm-product level. On average, adjustment on the profit margin does not appear to play a role. However, for more differentiated products, we find some evidence of an increase in markups, suggesting that firms do not fully pass-through increases in productivity on prices whenever they have enough bargaining power.
«Welcome to the machine: firms' reaction to low-skilled immigration», with Antonio Accetturo (Bank of Italy, Research Unit, Trento and Matteo Bugamelli (Bank of Italy, Research Department), Temi di discussione della Banca d'Italia No. 846, 2012
Abstract: We assess the impact of low-skilled immigration on capital intensity. We first present a model characterized by frictions in the labor market and firms' asymmetric information on workers' skills and show that firms can react to the immigration-induced reduction of their workforce's skill level by increasing the capital-labor ratio. We test the predictions of the model on a sample of Italian manufacturing firms over the period 1996-2007, finding that increased immigration of low-skilled workers from developing countries, measured at the provincial level and instrumented with pre-existing enclaves of immigrants and network effects, raises capital intensity. In line with the predictions of the theoretical model, the impact of immigration, which is quite robust across empirical specifications, is stronger for larger firms and in skill-intensive sectors.
«Innovation driven sectoral shocks and aggregate city cycles», manuscript 2011. Older version: Temi di discussione della Banca d'Italia No. 667, 2008
Abstract: This paper formalizes one mechanism through which diversity in the production of research & development across firms located in a city dampens wage volatility in the local labor market, improves the incentives to perform research & development and smooths the aggregate business cycle fluctuations of a city. This is done by adapting the standard multi-sector quality ladder model (Grossman and Helpman, 1991) in order to allow for firm specific localized knowledge spillovers, pecuniary externalities and segmented labor markets, in a general equilibrium setting. As a result, diversity in research & development allows innovations in different sectors of the city to arrive at different points in time, thus easing pressure on the local labor market and delivering smaller wage and output volatility over time. These predictions are supported by evidence based on data on wages, employment, output and patents for the U.S. Metropolitan Statistical Areas.
«Intercity Interactions: Evidence from U.S. cities», with G.I.P. Ottaviano, manuscript 2007
Abstract: Using national input-output matrices, we propose a strategy to identify pecuniary externalities operating across cities through the markets for intermediate goods. Then, controlling for common shocks in a spatial econometric framework, (i) we estimate the effect of pecuniary externalities on productivity growth on impact and in the long run; (ii) we disentangle it from the effect of local characteristics and other local interactions (i.e. knowledge or other face-to-face spillovers); (iii) we evaluate the spatial scope of operating of pecuniary externalities and other interactions using different distance measures. Our estimates suggest that pecuniary externalities and other local interactions coexist, that their effect on productivity growth is decreasing with distance and remains geographically bounded over time, thus possibly inducing agglomeration, and that it depends on inter-city diversity and the local patterns of industrial specialization.
«Changes in Infrastructure and Tariff Barriers: Local vs. Global Impacts» with K. Behrens, G.I.P. Ottaviano and T. Tabuchi, Temi di discussione della Banca D'Italia No.628, 2007 and CEPR d.p. No. 5103, 2005
«Testing the home market effect in a multi-country world: a theory-based approach», with K. Behrens, G.I.P. Ottaviano and T. Tabuchi, CORE d.p. 2005/55, Temi di discussione della Banca d'Italia No. 561, 2005 and CEPR d.p. No. 4468, 2004