Study finds 'net positive' impact of counterfeits on Italy

An analysis of the impact of counterfeiting in Italy has come up with a surprising conclusion – the illicit trade can have a net positive effect on economic growth.

The study – published in the journal Economic Analysis and Policy by researchers at the Sapienza University of Rome – is, however, a bit more nuanced. The authors report that while there is a boost to short-term economic growth from low-value, high-volume counterfeiting, when the activity targets high-value-added sectors – like fashion, luxury goods and automotive – it has a significantly negative impact.

To put it another way, despite being an economically disruptive activity with harmful effects on commercial IP rights, company profits, and public health and safety, there is another viewpoint – that counterfeiting can increase brand awareness among consumers and even encourage innovation to stay ahead of the knock-off producers.

"When economic crime is controlled by criminal organisations that turn it into a lucrative alternative, labour-surplus economies may tolerate high doses of it," write the authors in the paper. "This dynamic fosters an environment in which national economic growth is accompanied by the persistence of illegality and entrenched organised crime in specific areas."

The team have focused on a period of recession in the Italian economy between 2008 and 2019, and notes that the country's top industries are more reliant on intellectual property (IP) than the EU average, making them particularly vulnerable to illegal activities like counterfeiting.

Their overall finding is, however – perhaps surprisingly – that the net economic effect of counterfeiting overall is positive, indicating that, over the period considered, the economic stimulus provided by widespread low-value counterfeiting has outweighed the long-term harm caused by high-value counterfeiting.

That said, the study also concludes that the broad picture is that counterfeiting contributes to persistent regional disparities within Italy by dampening the effectiveness of legitimate growth mechanisms and is exacerbated by the social tolerance and embeddedness within institutions of non-violent economic crimes.

The market for counterfeit products in Italy is estimated to be worth €8.7bn, accounting for 2.1 per cent of national imports, according to OECD estimates, while the global trade in fake products infringing Italian trademarks is around €24.3bn.

The authors of the study make various policy recommendations, including stronger enforcement of IP rights to protect high-value sectors from counterfeiting, promoting economic alternatives to low-value counterfeiting in regions where illegal activities represent a significant source of income, and strengthening incentives for innovation and investment in sectors less vulnerable to counterfeiting.

They also recommend awareness-raising campaigns to emphasise to the public that counterfeiting is not a victimless crime.

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