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Regulation and UK Retailing Productivity: Evidence from Micro Data

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  • 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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  1. Victor Aguirregabiria & Pedro Mira & Hernan Roman, 2007. "An Estimable Dynamic Model of Entry, Exit and Growth in Oligopoly Retail Markets," Working Papers tecipa-275, University of Toronto, Department of Economics.
  2. Timmer, Marcel P. & Inklaar, Robert, 2005. "Productivity differentials in the U.S. and EU distributive trade sector: statistical myth or reality," CCSO Working Papers 200501, University of Groningen, CCSO Centre for Economic Research.
  3. Raffaella Sadun, 2008. "Does Planning Regulation Protect Independent Retailers?," CEP Discussion Papers dp0888, Centre for Economic Performance, LSE.
  4. 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.
  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. 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.
  7. Griffith, Rachel & Harmgart, Heike, 2008. "Supermarkets and Planning Regulation," CEPR Discussion Papers 6713, C.E.P.R. Discussion Papers.
  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. Oulton,Nicholas & O'Mahony,Mary, 1994. "Productivity and Growth," Cambridge Books, Cambridge University Press, number 9780521453455.
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