Deregulation and Growth in Italy

The aim of our exercise is to analyze the effects of anti-competitive service regulation on economic performance in Italy. In particular, we estimate the effects of the liberalization of product market in Italy during the 1996-2011 period on structural value added growth. The literature provides two ways of assessing such effects: the simulation of theoretical models or the empirical estimation of econometric equations. We opted for the empirical approach as we considered it overall closer to the actual policy actions and less reliant on ex ante and ex post assumptions. To overcome the difficulties to construct series of data capturing the policy progresses, we refer to the OECD sectoral regulation indicator (ECTR and RBSR) as an international reliable methodology to measure progresses in liberalization of utilities and in the simplification of the administrative burden for businesses. Our model captures the effect of deregulation on value added growth in structural terms. Results are consistent between the estimation for the economy as a whole (58 sectors) and for the manufacturing (27 sectors). The analysis sheds a new light on the issue of endogeneity between the regulation and the industrial structure expressed by the technical coefficients. In particular, our results pave the way of estimating national elasticities for the effect of deregulation on growth with important implications for policy making