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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
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Handle: RePEc:cpr:ceprdp:6637
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  1. Marianne Bertrand & Francis Kramarz, 2002. "Does Entry Regulation Hinder Job Creation? Evidence From The French Retail Industry," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1369-1413, November.
  2. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2003. "Regulation and Investment," OECD Economics Department Working Papers 352, OECD Publishing.
  3. 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.
  4. Schivardi, Fabiano & Torrini, Roberto, 2008. "Identifying the effects of firing restrictions through size-contingent differences in regulation," Labour Economics, Elsevier, vol. 15(3), pages 482-511, June.
  5. Sanghoon Ahn, 2002. "Competition, Innovation and Productivity Growth: A Review of Theory and Evidence," OECD Economics Department Working Papers 317, OECD Publishing.
  6. Gaiotti, Eugenio & Lippi, Francesco, 2005. "Pricing Behaviour and the Introduction of the Euro: Evidence from a Panel of Restaurants," CEPR Discussion Papers 4893, C.E.P.R. Discussion Papers.
  7. Aghion, Philippe & Blundell, Richard & Griffith, Rachel & Howitt, Peter & Prantl, Susanne, 2006. "The effects of entry on incumbent innovation and productivity," Discussion Papers, Research Unit: Competition and Innovation SP II 2006-18, Social Science Research Center Berlin (WZB).
  8. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  9. 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.
  10. Simeon Djankov & Rafael La Porta & Florencio LopezdeSilanes & Andrei Shleifer, 2000. "The Regulation of Entry," NBER Working Papers 7892, National Bureau of Economic Research, Inc.
  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. 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.
  13. Gordon, Robert J, 2004. "Why Was Europe Left at the Station when America's Productivity Locomotive Departed?," CEPR Discussion Papers 4416, C.E.P.R. Discussion Papers.
  14. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, 07.
  15. 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.
  16. 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.
  17. 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.
  18. Besley, Timothy & Case, Anne, 2000. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," Economic Journal, Royal Economic Society, vol. 110(467), pages F672-94, November.
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