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Local Retail Prices, Product Variety, and Neighborhood Change

Author

Listed:
  • Fernando Borraz
  • Felipe Carozzi
  • Nicolás González- Pampillón
  • Leandro Zipitría

Abstract

We study how local grocery markets within a city are affected by changes in housing markets. Our empirical strategy exploits a shift in the spatial distribution of construction activity induced by a large-scale, place-based tax exemption in the city of Montevideo. The introduction of new housing stock induced by the policy causes a reduction in grocery prices of 2.3 percent and an increase in locally available product varieties. Using insights from a multiproduct model of imperfect competition and estimates for different types of stores, we show these changes are the result of incumbents' response to an increase in local demand.

Suggested Citation

  • Fernando Borraz & Felipe Carozzi & Nicolás González- Pampillón & Leandro Zipitría, 2024. "Local Retail Prices, Product Variety, and Neighborhood Change," American Economic Journal: Economic Policy, American Economic Association, vol. 16(1), pages 1-33, February.
    • Handle: RePEc:aea:aejpol:v:16:y:2024:i:1:p:1-33
    DOI: 10.1257/pol.20210817
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    More about this item

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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