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Shopping externalities and retail concentration: Evidence from dutch shopping streets

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  • Koster, Hans R.A.
  • Pasidis, Ilias
  • van Ommeren, Jos

Abstract

Why do shops cluster in shopping streets? We argue that retail firms benefit from shopping externalities. We identify these externalities for the main Dutch shopping streets by estimating the effect of footfall – the number of pedestrians that pass by – and the number of shops in the vicinity on store owners’ rental income. We address endogeneity issues by exploiting spatial variation within shopping streets combined with historic long-lagged instruments. Our estimates imply an elasticity of rental income with respect to footfall as well as number of shops in the vicinity of (at least) 0.25. We show that these shopping externalities are unlikely to be internalised. It follows that substantial subsidies to shop owners are welfare improving, seemingly justifying current policies. Finally, we find limited evidence for heterogeneity between retail firms located in shopping streets in their willingness to pay for shopping externalities.

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  • Koster, Hans R.A. & Pasidis, Ilias & van Ommeren, Jos, 2019. "Shopping externalities and retail concentration: Evidence from dutch shopping streets," Journal of Urban Economics, Elsevier, vol. 114(C).
    • Handle: RePEc:eee:juecon:v:114:y:2019:i:c:s0094119019300713
    DOI: 10.1016/j.jue.2019.103194
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    1. Paul C. Cheshire & Christian A. L. Hilber & Piero Montebruno & Rosa Sanchis-Guarner, 2022. "(IN)convenient stores? What do policies pushing stores to town centres actually do?," Working Papers 2022/09, Institut d'Economia de Barcelona (IEB).
    2. Martijn I Dröes & Hans R A Koster, 2023. "A world divided: refugee centers, house prices and household preferences," Journal of Economic Geography, Oxford University Press, vol. 23(1), pages 51-90.
    3. Formánek, Tomáš & Sokol, Ondřej, 2022. "Location effects: Geo-spatial and socio-demographic determinants of sales dynamics in brick-and-mortar retail stores," Journal of Retailing and Consumer Services, Elsevier, vol. 66(C).
    4. Ioulia Ossokina & Coen Teulings & Jan Svitak, 2017. "The urban economics of retail," CPB Discussion Paper 352, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Ioulia Ossokina & Coen Teulings & Jan Svitak, 2017. "The urban economics of retail," CPB Discussion Paper 352.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Gilles Duranton & Diego Puga, 2020. "The Economics of Urban Density," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 3-26, Summer.
    7. Stuart S. Rosenthal & William C. Strange, 2020. "How Close Is Close? The Spatial Reach of Agglomeration Economies," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 27-49, Summer.
    8. Maral Taşcılar & Kerem Yavuz Arslanlı, 2022. "Forecasting commercial real estate indicators under COVID-19 by adopting human activity using social big data," Asia-Pacific Journal of Regional Science, Springer, vol. 6(3), pages 1111-1132, October.
    9. Yuhei Miyauchi & Kentaro Nakajima & Stephen J. Redding, 2021. "The Economics of Spatial Mobility: Theory and Evidence Using Smartphone Data," NBER Working Papers 28497, National Bureau of Economic Research, Inc.
    10. Sung Hyo Hong & Junhong Im & Gyoungju Lee, 2023. "Industry Structure of Commercial Districts and the Impact of COVID-19," Sustainability, MDPI, vol. 15(11), pages 1-11, May.
    11. Song Zhang & Mark Duijn & Arno J. Vlist, 2023. "Tenant Mix and Retail Rents in High Street Shopping Districts," The Journal of Real Estate Finance and Economics, Springer, vol. 67(1), pages 72-107, July.
    12. Federica Daniele & Mariona Segu & David Bounie & Youssouf Camara, 2022. "Bike-friendly cities: an opportunity for local businesses? Evidence from the city of Paris," THEMA Working Papers 2022-09, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    13. Klingen, Joris & van Ommeren, Jos, 2020. "Urban air pollution and time losses: Evidence from cyclists in London," Regional Science and Urban Economics, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    Retail; Shopping externalities; Rents; Vacancies; Agglomeration economies; Footfall;
    All these keywords.

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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