Study exposes ‘double whammy’ of fakes on Italian economy

Ambivalence to the trade in counterfeit goods in Italy – one of the top exporters of fakes in Europe – ignores a net negative impact on the economy, says a new study.

Researchers from the University of Rome say that counterfeiting has deleterious consequences for legitimate businesses and firms’ reputations, and makes it easier for criminal infiltration of the legal economy, but also supports non-criminal, low-income families in depressed areas.

Anti-counterfeit enforcement also has to compete for limited public resources with efforts to combat other types of crime which often have a greater impact on society.

For those reasons, some governments – including Italy – demonstrate a reluctance to tackle the production and sale of counterfeit goods, a situation made worse by bureaucratic inefficiencies and corruption, they write in the European Journal of Political Economy.

In Italy, a large proportion of the economy relies on some form of intellectual property rights (IPR), and it is the third European country after the US and France affected by IP infringement, according to the figures from the OECD.

“The counterfeiting industry is almost completely run by criminal organisations, which have turned it from a handcrafted activity into a criminal business of global dimensions,” say the researchers in the paper.

However, they add that “the government’s response has been slow and often weak.”

Using data from 2008 to 2013, the researchers have modelled the impact of the counterfeit trade across Italy, and concluded that it has a two-fold effect on the economy.

On the one hand, fakes depress legal trade that relies on IPR, but on the other counterfeiting increases the flow of Italian goods to the rest of the world, whilst supporting the shadow economy in terms of employment and income by acting as a “social buffer in areas of widespread unemployment, social and economic depression, and insufficient public control of the territory.”

The positive trade flows could well be offset however by the loss of private investors’ confidence, a brake on innovation among businesses, and the destruction of competitiveness and business development that is felt keenly by Italy’s large repository of small and medium sized enterprises.

“Tolerance of counterfeiting activities, in the hope of beneficial effects on the local economy, actually generates a net damage to Italian [trade] exchanges,” they conclude.

Image by Kookay from Pixabay