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Regulation and UK Retailing Productivity: Evidence from Microdata

  • Jonathan Haskel
  • Raffaella Sadun

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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Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 79 (2012)
Issue (Month): 315 (07)
Pages: 425-448

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Handle: RePEc:bla:econom:v:79:y:2012:i:315:p:425-448
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  1. Ronald Jarmin & Shawn Klimek & Javier Miranda, 2005. "The Role of Retail Chains: National, Regional, and Industry Results," Working Papers 05-30, Center for Economic Studies, U.S. Census Bureau.
  2. 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 08-23r, Center for Economic Studies, U.S. Census Bureau, revised Sep 2011.
  3. Raffaella Sadun, 2008. "Does planning regulation protect independent retailers?," LSE Research Online Documents on Economics 28503, London School of Economics and Political Science, LSE Library.
  4. Griffith, Rachel & Harmgart, Heike, 2008. "Supermarkets and Planning Regulation," CEPR Discussion Papers 6713, C.E.P.R. Discussion Papers.
  5. repec:cup:cbooks:9780521453455 is not listed on IDEAS
  6. Rachel Griffith & Heike Harmgart, 2005. "Retail productivity," IFS Working Papers W05/07, Institute for Fiscal Studies.
  7. repec:dgr:rugggd:200576 is not listed on IDEAS
  8. 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.
  9. 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.
  10. Steve Bond & Måns Söderbom, 2005. "Adjustment costs and the identification of Cobb Douglas production functions," IFS Working Papers W05/04, Institute for Fiscal Studies.
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