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The costs of zoning regulations in retail chains: the case of the City Planning Act of 1968 in Japan


  • Mitsukuni Nishida



The deregulation of zoning restrictions on retailers has been at the forefront of urban policy debates in recent years. Despite the increasing attention, however, we know surprisingly little about how the zoning regulations, which impose a constraint on the supply of land for a particular use, affect retailers in urban areas. This paper examines the effect of the zoning regulations introduced in 1968 in Japan on entry of convenience-store outlets. The act specifies two zoning restrictions for retail outlets. First, the law prohibits building commercial outlets in specified residential and industrial areas (“type 1 zoning”). Second, the law requires a developer to obtain permission from the local government to develop an outlet in specified areas (“type 2 zoning”). To account for the spatial dependence in demand, costs, and zoning regulation status across markets, this paper employs an equilibrium model of store-network choice by multistore firms. Using the cross-sectional data of entry and zoning in Okinawa in 2002, the paper finds hypothetically eliminating the type 1 and type 2 regulations would increase the total number of convenience-store outlets by 10–14 and 2–3 %, respectively. Although the magnitude of the increase in store counts and sales are similar across two national chains in Okinawa, the geographical markets in which each firm increases its outlets after the deregulation differ across these two chains. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Mitsukuni Nishida, 2014. "The costs of zoning regulations in retail chains: the case of the City Planning Act of 1968 in Japan," Journal of Regulatory Economics, Springer, vol. 45(3), pages 305-328, June.
  • Handle: RePEc:kap:regeco:v:45:y:2014:i:3:p:305-328
    DOI: 10.1007/s11149-014-9247-x

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    References listed on IDEAS

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    Cited by:

    1. Schuetz, Jenny, 2015. "Why are Walmart and Target Next-Door neighbors?," Regional Science and Urban Economics, Elsevier, vol. 54(C), pages 38-48.
    2. Pozzi, Andrea & Schivardi, Fabiano, 2015. "Entry Regulation in Retail Markets," CEPR Discussion Papers 10836, C.E.P.R. Discussion Papers.

    More about this item


    Zoning; Entry; Regulation; Chain; Retailing; L1; L5; R3;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location


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