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Regulation and UK Retailing Productivity: Evidence from Micro Data

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Author Info

  • Haskel, Jonathan

    ()
    (Imperial College London)

  • Sadun, Raffaella

    ()
    (Harvard Business School)

Abstract

We use UK micro data to explore whether planning regulation reduced UK retailing productivity growth between 1997 and 2003. We document a shift to smaller shops, particularly within supermarket chains, following a regulatory change in 1996 which increased the costs of opening large stores. This might have caused a slowdown in productivity growth if firms (a) lose scale advantages, by moving to smaller stores and (b) lose scope advantages if existing organisational knowledge appropriate to larger stores is not perfectly substitutable with the organisational capital required to run smaller stores. Our micro data shows a relation, controlling for fixed effects, between chain-level TFP for multi-store chains and various measures of the size of the stores within the chain. Our results suggest the fall in within-chain shop sizes was associated with a lowering of chain TFP by about 0.4% pa, about 40% of the post-1995 slowdown in UK retail TFP growth. The foregone productivity works out at about £80,000 per small chain supermarket store.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4028.

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Length: 44 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4028

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Keywords: productivity; retail; regulation;

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References

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  1. Ronald S. Jarmin & Shawn D. Klimek & Javier Miranda, 2009. "The Role of Retail Chains: National, Regional and Industry Results," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 237-262 National Bureau of Economic Research, Inc.
  2. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
  3. Timmer, Marcel & Inklaar, Robert, 2005. "Productivity differentials in the U.S. and EU distributive trade sector: statistical myth or reality," GGDC Research Memorandum 200576, Groningen Growth and Development Centre, University of Groningen.
  4. Victor Aguirregabiria & Pedro Mira & Hernan Roman, 2007. "An Estimate Dynamic Model of Entry, Exit, and Growth in Oligopoly Retail Markets," American Economic Review, American Economic Association, vol. 97(2), pages 449-454, May.
  5. Steve Bond & Måns Söderbom, 2005. "Adjustment costs and the identification of Cobb Douglas production functions," IFS Working Papers W05/04, Institute for Fiscal Studies.
  6. Raffaella Sadun, 2014. "Does Planning Regulation Protect Independent Retailers?," NBER Working Papers 19797, National Bureau of Economic Research, Inc.
  7. Oulton,Nicholas & O'Mahony,Mary, 1994. "Productivity and Growth," Cambridge Books, Cambridge University Press, number 9780521453455, November.
  8. Emek Basker & Shawn Klimek & Pham Hoang Van, 2008. "Supersize It - The Growth of Retail Chains and the Rise of the "Big Box" Retail Format," Working Papers 0809, Department of Economics, University of Missouri, revised 30 Sep 2010.
  9. Rachel Griffith & Heike Harmgart, 2005. "Retail productivity," IFS Working Papers W05/07, Institute for Fiscal Studies.
  10. Griffith, Rachel & Harmgart, Heike, 2008. "Supermarkets and Planning Regulation," CEPR Discussion Papers 6713, C.E.P.R. Discussion Papers.
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Cited by:
  1. Priit Vahter & Jaan Masso, 2011. "The Link between Innovation and Productivity in Estonia’s Service Sectors," William Davidson Institute Working Papers Series wp1012, William Davidson Institute at the University of Michigan.
  2. Crafts, Nicholas, 2012. "British relative economic decline revisited: The role of competition," Explorations in Economic History, Elsevier, vol. 49(1), pages 17-29.
  3. Horst Raff & Nicolas Schmitt, 2009. "Imports, Pass-Through, and the Structure of Retail Markets," CESifo Working Paper Series 2817, CESifo Group Munich.
  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. Lang, Åsa, 2012. "City Retailers’ Perceptions of Competition: A Choice Experiment," HUI Working Papers 58, HUI Research.
  6. Horst Raff & Nicolas Schmitt, 2012. "Imports and the structure of retail markets," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1431-1455, November.
  7. Dhillon, Amrita & Iversen, Vegard & Torsvik, Gaute, 2012. "Employee referral, social proximity and worker discipline," CAGE Online Working Paper Series 90, Competitive Advantage in the Global Economy (CAGE).
  8. Maican, Florin & Orth, Matilda, 2008. "Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing," Working Papers in Economics 328, University of Gothenburg, Department of Economics.
  9. Dan Corry & Anna Valero & John Van Reenen, 2011. "UK Economic Performance Since 1997: Growth, Productivity and Jobs," CEP Special Papers 24, Centre for Economic Performance, LSE.
  10. 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.
  11. Daunfeldt, Sven-Olov & Mihaescu, Oana & Nilsson, Helena & Rudholm, Niklas, 2014. "What Happens When IKEA Comes to Town?," HUI Working Papers 100, HUI Research.
  12. Paul Cheshire & Christian Hilber & Ioannis Kaplanis, 2011. "Land Use Regulation & Retail: Space Constraints and Total Factor Productivity," ERSA conference papers ersa10p1084, European Regional Science Association.
  13. Crafts, Nicholas, 2011. "British Relative Economic Decline Revisited," CAGE Online Working Paper Series 42, Competitive Advantage in the Global Economy (CAGE).
  14. Cheshire, Paul C. & Hilber, Christian & Kaplanis, Ioannis, 2012. "Land use regulation and productivity - Land matters: Evidence from a UK Supermarket chain," Working Papers 2072/196650, Universitat Rovira i Virgili, Department of Economics.
  15. Harchaoui, Tarek M., 2012. "The Europe-U.S. Retail Trade Productivity Gap in a Rear-view Mirror," GGDC Research Memorandum GD-127, Groningen Growth and Development Centre, University of Groningen.
  16. Maican, Florin & Orth, Matilda, 2012. "A Dynamic Analysis of Regulation and Productivity in Retail Trade," Working Paper Series 939, Research Institute of Industrial Economics.
  17. 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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