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Does Planning Regulation Protect Independent Retailers?

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Author Info
Raffaella Sadun

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Abstract

Entry regulations against big-box retailers have been introduced in many countries to protectsmaller independent stores. Using a new dataset from the UK, I show that in fact these entryregulations have been associated with greater employment declines in independent storesthey were meant to protect. The reason is that when large retail chains are prevented fromentering a new area with a big-box store, they typically enter instead using a smaller in-townstore format. These smaller format stores compete more directly with independent stores. Tocausally identify this impact I use the changing nature of local political control in the UKfrom 1993 to 2003. Since local politicians directly control planning regulation in the UK, andpolitical parties have very different views on the ideal amount of planning control, thisprovides exogenous variation in the ease of entry for big-box retailers. I estimate that 15% ofthe employment decline experienced by independent retailers between 1998 and 2004 can beattributed 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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Related research
Keywords: Zoning; Location; Retail; Regulation;

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Find related papers by JEL classification:
K2 - Law and Economics - - Regulation and Business Law
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Howard Smith, 2006. "Store Characteristics in Retail Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 37(2), pages 416-430, Summer.
  2. Mirko Draca & Stephen Machin & John Van Reenen, 2008. "Minimum Wages and Firm Profitability," NBER Working Papers 13996, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Emek Basker, 2005. "Job Creation or Destruction? Labor Market Effects of Wal-Mart Expansion," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 174-183, 02. [Downloadable!] (restricted)
    Other versions:
  4. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Duranton, Gilles & Gobillon, Laurent & Overman, Henry G., 2006. "Assessing the Effects of Local Taxation Using Microgeographic Data," CEPR Discussion Papers 5856, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring. [Downloadable!] (restricted)
  7. PaulC. Cheshire & ChristianA.L. Hilber, 2008. "Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge," Economic Journal, Royal Economic Society, vol. 118(529), pages F185-F221, 06. [Downloadable!] (restricted)
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  8. Lucia Foster & John Haltiwanger & C. J Krizan, 2006. "Market Selection, Reallocation, and Restructuring in the U.S. Retail Trade Sector in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 748-758, November. [Downloadable!] (restricted)
  9. Fabiano Schivardi & Eliana Viviano, 2007. "Entry barriers in Italian retail trade," Temi di discussione (Economic working papers) 616, Bank of Italy, Economic Research Department. [Downloadable!]
  10. Rachel Griffith & Heike Harmgart, 2005. "Retail productivity," IFS Working Papers W05/07, Institute for Fiscal Studies. [Downloadable!]
  11. Glaeser, Edward L & Gyourko, Joseph & Saks, Raven, 2005. "Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices," Journal of Law & Economics, University of Chicago Press, vol. 48(2), pages 331-69, October.
  12. Eric D. Gould & B. Peter Pashigian & Canice J. Prendergast, 2005. "Contracts, Externalities, and Incentives in Shopping Malls," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 411-422, 06. [Downloadable!] (restricted)
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  13. Dirk Pilat, 1997. "Regulation and Performance in the Distribution Sector," OECD Economics Department Working Papers 180, OECD, Economics Department. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Prantl, Susanne & Spitz-Oener, Alexandra, 2009. "How Does Entry Regulation Influence Entry into Self-Employment and Occupational Mobility?," IZA Discussion Papers 4221, Institute for the Study of Labor (IZA). [Downloadable!]
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