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Entry Barriers in Retail Trade

  • Schivardi, Fabiano
  • Viviano, Eliana

The 1998 reform of the Italy's retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on firms' performance for a representative sample of retailers. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and substantially lower productivity of incumbent firms. Liberalizing entry has a positive effect on investment in ICT. Consistently, more stringent entry regulation results in higher inflation: lower productivity coupled with larger margins results in higher consumer prices.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6637.

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Date of creation: Jan 2008
Date of revision:
Handle: RePEc:cpr:ceprdp:6637
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  1. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2006. "The Effects of Entry on Incumbent Innovation and Productivity," NBER Working Papers 12027, National Bureau of Economic Research, Inc.
  2. Bertrand, Marianne & Kramarz, Francis, 2001. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," CEPR Discussion Papers 3039, C.E.P.R. Discussion Papers.
  3. Silvia Fabiani & Fabiano Schivardi & Sandro Trento, 2005. "ICT adoption in Italian manufacturing: firm-level evidence," Industrial and Corporate Change, Oxford University Press, vol. 14(2), pages 225-249, April.
  4. Schivardi, Fabiano & Torrini, Roberto, 2005. "Identifying the Effects of Firing Restrictions Through Size-Contingent Differences in Regulation," CEPR Discussion Papers 5303, C.E.P.R. Discussion Papers.
  5. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Trade costs, firms and productivity," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 917-937, July.
  6. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2003. "Regulation and Investment," OECD Economics Department Working Papers 352, OECD Publishing.
  7. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  8. Timothy Besley & Anne Case, 1994. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," NBER Working Papers 4956, National Bureau of Economic Research, Inc.
  9. Robert J. Gordon, 2004. "Why was Europe Left at the Station When America's Productivity Locomotive Departed?," NBER Working Papers 10661, National Bureau of Economic Research, Inc.
  10. Eugenio Gaiotti & Francesco Lippi, 2005. "Pricing behavior and the introduction of the euro: evidence from a panel of restaurants," Macroeconomics 0501029, EconWPA, revised 15 Feb 2005.
  11. Lucia Foster & John Haltiwanger & C.J. Krizan, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," NBER Working Papers 9120, National Bureau of Economic Research, Inc.
  12. Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006. "Who adjusts and when? On the political economy of reforms," Harvard Institute of Economic Research Working Papers 2108, Harvard - Institute of Economic Research.
  13. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001. "The Regulation of Entry," Working Paper Series rwp01-015, Harvard University, John F. Kennedy School of Government.
  14. Sanghoon Ahn, 2002. "Competition, Innovation and Productivity Growth: A Review of Theory and Evidence," OECD Economics Department Working Papers 317, OECD Publishing.
  15. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, 07.
  16. Eliana Viviano, 2006. "Entry regulations and labor market outcomes: evidence from the Italian retail trade sector," Temi di discussione (Economic working papers) 594, Bank of Italy, Economic Research and International Relations Area.
  17. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
  18. Bart van Ark & Robert Inklaar & Robert H. McGuckin, 2002. "'Changing Gear' - Productivity, ICT and Services Industries: Europe and the United States," Economics Program Working Papers 02-02, The Conference Board, Economics Program.
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