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How should place-based policies be designed to efficiently promote retail agglomeration?

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  • Aizawa, Hiroki
  • Kono, Tatsuhito

Abstract

Local governments have recently adopted place-based policies in order to revitalize decayed shopping areas in downtown areas. Developing a multipurpose shopping model, we evaluate the welfare impacts of place-based policies for downtown retail agglomeration. In the model, retail stores are under monopolistic competition, and consumers are free to choose where to reside. Results show that, whether or not place-based policies are efficient depends on the recipients of government subsidies, even if the policies promote retail agglomeration in downtown areas. Specifically, subsidizing consumers residing near downtown areas is inevitably harmful from the viewpoint of welfare, whereas subsidizing retail stores can be efficient.

Suggested Citation

  • Aizawa, Hiroki & Kono, Tatsuhito, 2023. "How should place-based policies be designed to efficiently promote retail agglomeration?," MPRA Paper 117055, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:117055
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    More about this item

    Keywords

    Agglomeration; Monopolistic competition; Multipurpose shopping; Place-based policy.;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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