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Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing

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Author Info

  • Maican, Florin

    ()
    (Department of Economics)

  • Orth, Matilda

    ()
    (Research Institute of Industrial Economics (IFN))

Abstract

Entry of large (“big-box”) stores along with a drastic fall in the total number of stores is a striking trend in retail markets. We use a dynamic structural model to estimate retail productivity in a local market setting. In particular, we provide a general strategy of how to measure the causal effect of entry of large stores on productivity separate from demand. To control for endogeneity of large entrants, we use political preferences. Using detailed data on all retail food stores in Sweden, we find that large entrants force low productivity stores to exit and surviving stores to increase their productivity. Productivity increases most among incumbents in the bottom part of the productivity distribution, and then declines with the productivity level of incumbents. When controlling for prices, the impact of large entrants on productivity increases substantially. Our findings suggest that large entrants play a crucial role for driving productivity growth.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 898.

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Length: 59 pages
Date of creation: 18 Jan 2012
Date of revision:
Handle: RePEc:hhs:iuiwop:0898

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Keywords: Retail markets; Imperfect competition; Industry dynamics; Productivity; Dynamic structural model;

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References

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Cited by:
  1. 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.
  2. Maican, Florin G., 2012. "From Boom to Bust and Back Again: A dynamic analysis of IT services," Working Papers in Economics 543, University of Gothenburg, Department of Economics.

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