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Evaluating the effects of planning policies on the retail sector: or do town centre first policies deliver the goods?

  • Paul Cheshire
  • Christian A. L. Hilber
  • Ioannis Kaplanis

Few studies conceive of land as a productive factor but British land use policies may lower total factor productivity (TFP) in the retailing industry by (i) restricting the total availability of land for retail, thereby increasing space costs (ii) directly limiting store size and (iii) concentrating retail development on specific central locations. We use unique store-specific data to estimate the impact of space on retail productivity and the specific effects of planning restrictiveness and micromanagement of store locations. We use the quasi natural experiment generated by the variation in planning policies between England, Wales, Scotland and Northern Ireland to isolate the impact of town centre first policies. We find that TFP rises with store size and that planning policy directly reduces productivity both by reducing store sizes and forcing retail onto less productive sites. Our results, while they strictly only apply to the supermarket group whose data we analyse, are likely to be representative of supermarkets in general and suggest that since the late 1980s planning policies have imposed a loss of TFP of at least 20%.

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File URL: http://eprints.lse.ac.uk/31757/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 31757.

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Length: 30 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:ehl:lserod:31757
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  1. Paul Cheshire & Christian A.L. Hilber, 2007. "Office space supply restrictions in Britain: the political economy of market revenge," LSE Research Online Documents on Economics 3203, London School of Economics and Political Science, LSE Library.
  2. Griffith, Rachel & Harmgart, Heike, 2008. "Supermarkets and Planning Regulation," CEPR Discussion Papers 6713, C.E.P.R. Discussion Papers.
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