A comparison between Spain and Italy based on granular economy theory

Abstract

The main objective of this paper is to explore whether there exist statistic evidence to conclude that Spain and Italy are granular economies by comparing the results obtained between both countries. For In order to conduct the study, we have followed the Gabaix paper from 2011. For this purpose, we have used a database with 30.000 companies for each country. One of the greatest indicators to know whether these countries present granular economies is the verification of an existing heterogeneity among the most powerful companies. In the present paper this is achieved in terms of sales and the rest of the companies. The second step has been to perform a simple regression analysis where we have the fictitious Gross Domestic Product (GDP) as the dependent variable and the sum of volume of sales of the 30.000 companies as the independent variable. The results obtained may conclude that there are enough statistic evidences to confirm that Spain is a granular economy but not for Italy.