The 1998 reform of the Italy's retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on firms' performance for a representative sample of retailers. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and substantially lower productivity of incumbent firms. Liberalizing entry has a positive effect on investment in ICT. Consistently, more stringent entry regulation results in higher inflation: lower productivity coupled with larger margins results in higher consumer prices.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
6637.
Fabiano Schivardi & E. Viviano, 2009.
"Entry Barriers in Retail Trade,"
Working Paper CRENoS
200908, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
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Find related papers by JEL classification: L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L5 - Industrial Organization - - Regulation and Industrial Policy L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
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Djankov, Simeon & La Porta, Rafael & López-de-Silanes, Florencio & Shleifer, Andrei, 2001.
"The Regulation of Entry,"
CEPR Discussion Papers
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[Downloadable!] (restricted)
Other versions:
Simeon Djankov & Rafael La Porta & Florencio LopezdeSilanes & Andrei Shleifer, 2000.
"The Regulation of Entry,"
NBER Working Papers
7892, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001.
"The Regulation of Entry,"
Working Paper Series
rwp01-015, Harvard University, John F. Kennedy School of Government.
[Downloadable!]
Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2003.
"Regulation and Investment,"
NBER Working Papers
9560, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)