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Does Planning Regulation Protect Independent Retailers?

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  • Raffaella Sadun

Abstract

Entry regulations against big-box retailers have been introduced in many countries to protect smaller independent stores. Using a new dataset from the UK, I show that in fact these entry regulations have been associated with greater employment declines in independent stores they were meant to protect. The reason is that when large retail chains are prevented from entering a new area with a big-box store, they typically enter instead using a smaller in-town store format. These smaller format stores compete more directly with independent stores. To causally identify this impact I use the changing nature of local political control in the UK from 1993 to 2003. Since local politicians directly control planning regulation in the UK, and political parties have very different views on the ideal amount of planning control, this provides exogenous variation in the ease of entry for big-box retailers. I estimate that 15% of the employment decline experienced by independent retailers between 1998 and 2004 can be attributed to the perverse effect of planning regulation.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0888.

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Date of creation: Aug 2008
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Handle: RePEc:cep:cepdps:dp0888

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Keywords: Zoning; Location; Retail; Regulation;

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Citations

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Cited by:
  1. Raff, Horst & Schmitt, Nicolas, 2011. "Imports and the structure of retail markets," Economics Working Papers 2011,05, Christian-Albrechts-University of Kiel, Department of Economics.
  2. Susanne Prantl & Alexandra Spitz-Oener, 2009. "How does entry regulation influence entry into self-employment and occupational mobility?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(4), pages 769-802, October.
  3. Dan Corry & Anna Valero & John Van Reenen, 2011. "UK economic performance since 1997: growth, productivity and jobs," LSE Research Online Documents on Economics 47521, London School of Economics and Political Science, LSE Library.
  4. Max Nathan & Henry G. Overman, 2011. "What We Know (and Don't Know) About the Links between Planning and Economic Performance," SERC Policy Papers 010, Spatial Economics Research Centre, LSE.
  5. Eliana Viviano & Luciana Aimone Gigio & Emanuela Ciapanna & Daniele Coin & Fabrizio Colonna & Federica Lagna & Raffaele Santioni, 2012. "The retail trade sector and the food industry in Italy," Questioni di Economia e Finanza (Occasional Papers) 119, Bank of Italy, Economic Research and International Relations Area.
  6. Fernando Borraz & Juan Dubra & Daniel Ferrés & Leandro Zipitría, 2013. "Supermarket Entry and The Survival of Small Stores," Documentos de Trabajo/Working Papers 1303, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
  7. Maican, Florin & Orth, Matilda, 2012. "Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing," Working Paper Series 898, Research Institute of Industrial Economics.
  8. Jonathan Haskel & Raffaella Sadun, 2012. "Regulation and UK Retailing Productivity: Evidence from Microdata," Economica, London School of Economics and Political Science, vol. 79(315), pages 425-448, 07.
  9. Paul Cheshire & Christian A. L. Hilber & Ioannis Kaplanis, 2013. "Land Use Regulation and Productivity - Land Matters: Evidence from a UK Supermarket Chain," SERC Discussion Papers 0138, Spatial Economics Research Centre, LSE.
  10. Susanne Prantl, 2012. "The impact of firm entry regulation on long-living entrants," Small Business Economics, Springer, vol. 39(1), pages 61-76, July.
  11. Christian A. L. Hilber & Wouter Vermeulen, 2012. "The Impact of Supply Constraints on House Prices in England," SERC Discussion Papers 0119, Spatial Economics Research Centre, LSE.
  12. Maican, Florin & Orth, Matilda, 2012. "A Dynamic Analysis of Regulation and Productivity in Retail Trade," Working Paper Series 939, Research Institute of Industrial Economics, revised 12 Apr 2014.
  13. Paul C. Cheshire & Christian A. L. Hilber & Ioannis Kaplanis, 2012. "Evidence from a UK supermarket chain," Working Papers 2012/15, Institut d'Economia de Barcelona (IEB).

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