Land Use Regulation & Retail: Space Constraints and Total Factor Productivity
AbstractIntroductory economics tells us there are three factors of production: land, labour and capital. Unless a student of agricultural economics, land as a factor of production will never be mentioned again. Yet space for some industries is a significant input and that would seem to be true of retailing. This is a sizable sector of the economy â€šÃ„Ã¬ on a reasonable measure of employment the second largest industry in the UK. Land use policies in the UK have the effect of restricting the availability of land for retail; in addition â€šÃ„Ã²town-centre-firstâ€šÃ„Ã´ policy concentrates retail development on expensive central land and so increases the cost of retail space. In British cities in the mid 1980s the most expensive land for retail was 250 times as expensive as the most expensive retail land in comparable US cities. This paper uses a unique micro data set of store specific information to estimate the impact on productivity of space and the specific effects of planning restrictiveness on the productivity of retailing. It is the first paper to analyse the contribution of space to productivity and to relate that firmly to land use regulation policies. Our results suggest that TFP rises with store size and that planning restrictiveness directly reduces productivity in retailing thereby increasing retail prices. JEL classification: D2, L51, L81, R32. Keywords: Land use regulation, regulatory costs, firm productivity, retail
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Bibliographic InfoPaper provided by European Regional Science Association in its series ERSA conference papers with number ersa10p1084.
Date of creation: Sep 2011
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Find related papers by JEL classification:
- D2 - Microeconomics - - Production and Organizations
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
- R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
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"Office space supply restrictions in Britain: the political economy of market revenge,"
LSE Research Online Documents on Economics
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"Regulation and UK Retailing Productivity: Evidence from Micro Data,"
CEPR Discussion Papers
7140, C.E.P.R. Discussion Papers.
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