The hypotheses regarding the performance of the Italian movie industry are based on two dimensions: quantity (i.e., box-office revenue) and quality (i.e., prizes won at film festivals). For the analysis of box-office performance, the baseline specification expresses the revenue of a movie i as a function of public subsidies, if any, and genre, that is, comedy, drama, thriller or documentary, which is treated as the reference category (see Equation ). As stated in the methodological section, two separate specifications are run, that is, a panel random effects model and a panel fixed effects model. To establish which model empirically fits the data better, a Hausman test is run. In this case, the calculated value of the Chi-squared \(=\) 21.48 (0.000) implies that the fixed effects model under the alternative hypothesis is empirically a better specification that presents a higher level of efficiency. Table 4 presents the relevant results obtained from each of the specifications.
Overall, the results are rather congruent in terms of magnitude of the coefficients and in terms of sign in both the random and fixed effects specifications. The first result is that publicly subsided movies, when compared with non-subsided movies, have a negative impact on box-office revenue. Furthermore, comedies appear to play a leading role in attracting demand, followed by thrillers and dramas, when compared with the reference category. These findings are all consistent with the results obtained by Bagella and Becchetti (1999), thus reinforcing the relevant role played by the comedy genre in driving the box-office performance of Italian movies as well as the negative effects exerted by public intervention.
As a further expansion of the investigation, the impact of public financing, if any, for different movie genres on box-office revenues is investigated, as expressed in Eq. 2. Once again, a panel random model and a fixed effects model are run. The Hausman test implies that the fixed effects model presents a higher level of efficiency.
Table 5 shows evidence of a positive and statistically significant impact of subsidies for three genres out of four. However, the magnitude of the interaction coefficients of non-financed movies is much higher, which highlights their greater impact on revenues. On the whole, financing comedies guarantees the best resource allocation, which again confirms the results of Bagella and Becchetti (1999). Nevertheless, the preference of Italian viewers for the comedy genre suggests further policy implications. The empirical results in fact suggest that there should be a shift in public resource allocations toward thrillers and dramas, which are also likely to exert positive externalities and to play a greater educational role.
Turning to the factors that influence the quality of the produced movies, Eq. 3 is estimated employing a Poisson specification. Both the coefficients and the incidence rate ratios are presented. The latter measure is used to compare the incidence rates of events occurring at any given point in time or space. From the descriptive statistics, it emerges that 279 of the 311 financed movies participated in at least one festival (see Table 3). Hence, by takinginto account only film festival participation and prizes won, a subset of 461 movies is considered. As a matter of interest, the Poisson results are congruent with the results obtained when employing a negative binomial specification (full results are available upon request). The regression results from the baseline model are presented in Table 6.
The magnitude of the incidence ratio for the festival participation variable confirms that participation at festivals does not automatically lead to more awards. Moreover, as in the previous baseline model, public subsidies show a negative and statistically significant coefficient sign, and the IRR shows that awards are expected to decrease by a factor of 0.98 when holding all other variables in the model constant. Moreover, the genre with the best performance is drama; this result is coherent with the belief that quality may be better perceived in movies with an insightful and dramatic characterization. Proceeding a step further into the specification, Eq. 4 is estimated, and the interaction variables (i.e., subsidies, non-subsidies and different genres) are included in the Poisson specification.
Table 7 shows that the impact of subsidies on quality for each of the genres is rather negligible when compared with non-subsidies. Finally, the incidence rate ratios indicate that subsidized thrillers and dramas are the types of movies that lead to a relatively higher performance in terms of quality and therefore should also be also supported more by the public.
Moreover, we consider the possible impact of the added regulation from 2004 on box-office revenues and the quality of subsidized movies. We implement a dummy variable that takes the value 1 for movies released 2 years after the introduction of the change in the law. A 2-year lag is coherent with the average production time for a full-length motion picture and allows us to split the sample to consider a pre-treatment period so we can identify a possible shock in the dependent variables. However, we find that there is no statistical significance after the introduction of the reform in both box-office performance and awards granted.