Courts and Banks: Effects of Judicial Enforcement on Credit Markets

The costs of enforcing contracts is a key determinant of market performance. We document this point with reference to the credit market. We start by presenting a model of opportunistic debtors and inefficient courts. According to the model, improvements in judicial efficiency reduce credit rationing and increase lending, while have an ambiguous effect on interest rates, depending on banking competition and on the type of judicial reform. These predictions are supported by panel data on Italian provinces and by cross-country evidence. In Italian provinces with longer trials or large backlogs of pending trials, credit is less widely available than elsewhere. International evidence also shows that the depth of mortgage markets is inversely related to costs of mortgage foreclosure and other proxies for judicial inefficiency.enforcement, judicial efficiency, credit market, lending, interest rates

Diversification and Synergies: Effects on Profitability

This paper addresses the questions of the effects of diversification strategies on firms' profitability. Empirical analyses do not seem to confirm the hypothesis that diversification is the optimal response to the presence of synergies and hence generates higher profits. It is shown that this might be either the effect of distortions due to the omission of some other factors which affect the efficiency of firms, or the result of selection bias. Diversified firms, in fact, may be the less efficient firms, just able to survive due to the synergies they achieve diversifying.Diversification, synergies, profitabiity, firms.

The regulatory reforms in Italian local public services: an overview and some lessons for the future

The paper summarizes the framework used in a research project on local public services carried out by Bank of Italy researchers. It discusses motivations, characteristics, results and general lessons of the project, whose sector-specific results are detailed in individual papers. The project was set up to analyze the effectiveness and outcomes of a set of reforms initiated approximately 15 years ago (but still unfinished in many respects). Studies of specific economically important and socially sensitive sectors were performed, to obtain an updated picture of the current framework (ownership structure, role of local authorities) and evaluate performance (market structure, costs and quality, profitability, environmental results). A set of horizontal studies (on the evolution of regulation, the spread of project financing, the growth of some large players) complemented the sectoral analyses. As a whole the project confirmed that the results of the reforms have been unsatisfactory. The paper also discusses some characteristics of the regulatory framework and market structures that could explain the reforms’ poor results: a) insufficient attention to sectoral peculiarities in the regulatory design; b) the approach used in determining tariffs that should have covered full costs; c) excessively fragmented regulatory authorities, which were set up at too local a level; d) insufficient separation between the different roles played by local authorities as regulators, majority shareholders of service providers and representatives of consumers’ interests.local public services, liberalization, regulation

Diversification patterns: Theory and evidence for the food industry in the U.K. and Italy.

The thesis is organized around two closely interlinked questions: (a) At a theoretical level, is it the case that diversification activities driven by economies of scope should lead to a positive correlation between diversification and profitability (b) Empirically, can a theoretical model account for observed patterns of diversification activities over time and across countries Following a general discussion of the main issues related to diversification in chapter 1, chapter 2 answers to the first question in the negative. In a model where diversification is induced by the presence of synergies, it is shown that diversified firms may be on average the less efficient firms on the market and may survive only due to the presence of synergies. This is consistent with the results of earlier empirical studies, showing no correlation between diversification and profitability. Therefore the empirical part of the thesis focuses on patterns of diversification rather than on the link with profitability. Models that attribute diversification to the presence of 'economies of scope' suggest that diversification patterns are determined by technological factors, that are stable over time and over countries. In chapter 3 a specific sector (food and drink) is analysed in the U.K. over a long time period (1962- 1986) and the U.K. experience is compared to that of Italy (in 1986) through a standard loglinear model and a separate analytical approach. The main results are as follows: (1) U.K. diversification patterns are remarkably stable over time; (2) Italian diversification patterns appear quite different from those of the U.K., whether in 1962 or in 1986. Since overall diversification levels for the U.K. in 1962 are similar to those in Italy in 1986, it seems that patterns of diversification may be induced by country specific factors. In order to unravel the difference between U.K. and Italian experience in chapter 4 a series of case studies of specific industries and firms is carried out. They suggest that in the Italian economy, where the distribution sector is poorly developed, large firms can enjoy a strong advantage by building up their own distribution networks. While the case studies indicate the possible importance of several other factors, it is this factor that appears to be the single most important influence underlying the difference between the U.K. and Italy

The big players in Italian local public services. Constraints, opportunities and growth strategies

One of the objectives of the reforms and liberalization of the last 15 years in local public services was to reduce the traditional fragmentation of production. This was to be achieved through restructuring that reduced inefficiencies and made it more possible to exploit economies of scale, thereby stimulating the emergence of national “big players”. In this paper we analyze the evolution and current position of the largest operators that have emerged in the different sectors of local public services. The aim is to identify factors that have helped or hindered the growth process. Through an analysis of twelve among the largest businesses we identify four evolutionary paths. In our view the main drivers have been: a) a presence in the energy sector (mainly due to its high profitability); b) a favourable local political framework; and c) a tradition of efficient internal organization and independence of local politics.local public services, liberalization, growth strategies

Do Women Pay More for Credit? Evidence from Italy

Abstract The answer is yes. By using a unique and large data set on overdraft contracts between banks and microfirms and self-employed individuals, we find robust evidence that women in Italy pay more for overdraft facilities than men. We could not find any evidence that women are riskier then men. The male/female differential remains even after controlling for a large number of characteristics of the type of business, the borrower and the market structure of the credit market. The result is not driven by lack of credit history, nor by women using a different type of bank than men, since the same bank charges different rates to male and female borrowers. Social capital does play a role: high levels of trust loosen credit conditions by lowering interest rates, but this benefit is not evenly distributed, as women benefit from increased social capital less than men. * We than

Report on trends in the Italian productive system

In the last decade the Italian economy has underperformed compared both with the previous decades and with the main European countries. It is widely acknowledged that this evolution reflects unresolved structural problems, which have become more urgent in view of the major changes in the world economy (the new technological paradigm, globalization, European economic integration). The goal of the Report is to make a critical survey of all the empirical analyses on the Italian economy and to derive policy suggestions. The evolution of Italy’s productive system is examined from a long-run perspective, highlighting weaknesses and possible signs of recovery and elaborating on the systemic features that may have negatively affected growth performance directly or indirectly through the above exogenous shocks. The focus, mostly but not exclusively microeconomic, emphasizes the considerable heterogeneity of firms, a crucial element for identifying the factors that affect economic growth.growth, productivity, market structure, firm heterogeneity