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Regulation and UK Retailing Productivity: Evidence from Micro Data


  • Haskel, Jonathan
  • Sadun, Raffaella


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.

Suggested Citation

  • Haskel, Jonathan & Sadun, Raffaella, 2009. "Regulation and UK Retailing Productivity: Evidence from Micro Data," CEPR Discussion Papers 7140, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7140

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    References listed on IDEAS

    1. Ronald S. Jarmin & Shawn D. Klimek & Javier Miranda, 2009. "The Role of Retail Chains: National, Regional and Industry Results," NBER Chapters,in: Producer Dynamics: New Evidence from Micro Data, pages 237-262 National Bureau of Economic Research, Inc.
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    3. Victor Aguirregabiria & Pedro Mira & Hernan Roman, 2007. "An Estimate Dynamic Model of Entry, Exit, and Growth in Oligopoly Retail Markets," American Economic Review, American Economic Association, vol. 97(2), pages 449-454, May.
    4. Griffith, Rachel & Harmgart, Heike, 2008. "Supermarkets and Planning Regulation," CEPR Discussion Papers 6713, C.E.P.R. Discussion Papers.
    5. 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 0809, Department of Economics, University of Missouri, revised 30 Sep 2010.
    6. Roger R. Betancourt, 2004. "The Economics of Retailing and Distribution," Books, Edward Elgar Publishing, number 3511.
    7. Raffaella Sadun, 2015. "Does Planning Regulation Protect Independent Retailers?," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 983-1001, December.
    8. Rachel Griffith & Heike Harmgart, 2005. "Retail productivity," IFS Working Papers W05/07, Institute for Fiscal Studies.
    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.
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    Cited by:

    1. Maican, Florin & Orth, Matilda, 2008. "Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing," Working Papers in Economics 328, University of Gothenburg, Department of Economics.
    2. Priit Vahter & Jaan Masso, 2011. "The Link between Innovation and Productivity in Estonia???s Service Sectors," William Davidson Institute Working Papers Series wp1012, William Davidson Institute at the University of Michigan.
    3. Jen Baggs & Eugene Beaulieu & Loretta Fung & Beverly Lapham, 2016. "Firm Dynamics in Retail Trade: The Response of Canadian Retailers to Exchange Rate Shocks," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 635-666, August.
    4. Nathan, Max & Overman, Henry G., 2011. "What we know (and don't know) about the links between planning and economic performance," LSE Research Online Documents on Economics 59232, London School of Economics and Political Science, LSE Library.
    5. Fabiano Schivardi & Eliana Viviano, 2011. "Entry Barriers in Retail Trade," Economic Journal, Royal Economic Society, vol. 121(551), pages 145-170, March.
    6. Paul C. Cheshire & Christian A. L. Hilber & Ioannis Kaplanis, 2015. "Land use regulation and productivity—land matters: evidence from a UK supermarket chain," Journal of Economic Geography, Oxford University Press, vol. 15(1), pages 43-73.
    7. Haskel, J & Goodridge, P & Hughes, A & Wallis, G, 2015. "The contribution of public and private R&D to UK productivity growth," Working Papers 21171, Imperial College, London, Imperial College Business School.
    8. Charlotte Senftleben-König, 2014. "Product Market Deregulation and Employment Outcomes: Evidence from the German Retail Sector," Working Papers 2014009, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    9. Raff, Horst & Schmitt, Nicolas, 2009. "Imports, pass-through, and the structure of retail markets," Kiel Working Papers 1556, Kiel Institute for the World Economy (IfW).
    10. Maican, Florin & Orth, Matilda, 2015. "A dynamic analysis of entry regulations and productivity in retail trade," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 67-80.
    11. Crafts, Nicholas, 2012. "British relative economic decline revisited: The role of competition," Explorations in Economic History, Elsevier, vol. 49(1), pages 17-29.
    12. Crafts, Nicholas, 2011. "British Relative Economic Decline Revisited," CAGE Online Working Paper Series 42, Competitive Advantage in the Global Economy (CAGE).
    13. Corry, Dan & Valero, Anna & Van Reenen, John, 2011. "UK economic performance since 1997: growth, productivity and jobs," LSE Research Online Documents on Economics 47521, London School of Economics and Political Science, LSE Library.
    14. Lang, Åsa, 2012. "City Retailers’ Perceptions of Competition: A Choice Experiment," HUI Working Papers 58, HUI Research.
    15. Daunfeldt, Sven-Olov & Mihaescu, Oana & Nilsson, Helena & Rudholm, Niklas, 2014. "What Happens When IKEA Comes to Town?," HUI Working Papers 100, HUI Research.
    16. Paul Cheshire & Christian Hilber & Ioannis Kaplanis, 2011. "Land Use Regulation & Retail: Space Constraints and Total Factor Productivity," ERSA conference papers ersa10p1084, European Regional Science Association.
    17. Pozzi, Andrea & Schivardi, Fabiano, 2015. "Entry Regulation in Retail Markets," CEPR Discussion Papers 10836, C.E.P.R. Discussion Papers.
    18. Horst Raff & Nicolas Schmitt, 2012. "Imports and the structure of retail markets," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1431-1455, November.
    19. Paul C. Cheshire & Christian A. L. Hilber & Ioannis Kaplanis, 2012. "Evidence from a UK supermarket chain," Working Papers 2012/15, Institut d'Economia de Barcelona (IEB).
    20. Eliana Viviano & Luciana Aimone Gigio & Emanuela Ciapanna & Daniele Coin & Fabrizio Colonna & Federica Lagna & Raffaele Santioni, 2012. "The retail trade sector and the food industry in Italy," Questioni di Economia e Finanza (Occasional Papers) 119, Bank of Italy, Economic Research and International Relations Area.
    21. Maria Sanchez Vidal, 2016. "Small shops for sale! The effects of big-box openings on grocery stores," Working Papers 2016/12, Institut d'Economia de Barcelona (IEB).
    22. 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.
    23. Bilotkach, Volodymyr & Braakmann, Nils & Gonzalo-Almorox, Eduardo & Wildman, John, 2017. "The effect of house prices on the long-term care market: Evidence from England," MPRA Paper 81987, University Library of Munich, Germany.

    More about this item


    Productivity; Regulation.; Retail;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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