The Bank of Italy has published six working papers, including research showing how firms’ positions in production chains shape monetary policy transmission and how higher minimum wages can increase dominant firms’ pricing power. A separate study documents a widening gap in commercial vehicle quality between northern and southern Italy, with implications for interpreting regional productivity differences. The production network study uses administrative transaction data from Belgium, Estonia, Hungary, Italy and Portugal. Firms’ distance from final demand is largely unrelated to their size and is not recoverable from sectoral input and output tables. Evidence from Belgium and Estonia shows that monetary tightening produces more persistent sales declines among upstream firms as weaker demand travels backward through supply chains. A counterfactual exercise applying Belgian response estimates across the five economies illustrates how differences in production structures can generate different aggregate responses to a common shock. The minimum wage study identifies a separate concentration mechanism: workers move from smaller to larger firms, allowing the latter to gain market share and raise price markups. In its model estimated using Italian data, increased product market power offsets, on average, one-third of the reduction in employers’ labor market power. The welfare maximizing minimum wage directly affects 10% of workers, compared with 15% when markups are held fixed. The capital quality study finds that southern firms acquire older, less environmentally efficient commercial vehicles and retain them longer. The estimated vehicle stock averaged 12.7 years old in the South at the end of 2024, against 9.1 years in the North, and regional quality disparities widened over 2015–2024. Observable firm and vehicle characteristics explain about one-third of the regional variation. Geographic segmentation of used vehicle markets and fewer new vehicle purchases contribute to the gap, while transfers of newer used vehicles from the North partly offset it. Vehicle quality correlates with regional labor productivity, but the study does not establish causality.
Bank of Italy publishes six working papers examining monetary transmission, market power and economic disparities
The Bank of Italy has released six working papers, including evidence that firms’ positions in production chains shape the persistence of monetary policy effects beyond what firm size or sector averages capture. Research on minimum wages finds that increased pricing power among larger firms can partly offset reductions in employers’ labor market power. A separate study documents widening regional differences in commercial vehicle quality in Italy, associated with, but not proven to cause, productivity disparities.