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Entry Barriers in Retail Trade

Listed author(s):
  • Fabiano Schivardi

    (Università di Cagliari and EIEF)

  • Eliana Viviano

    (Bank of Italy)

The 1998 reform of the Italian 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. Finally, more stringent entry regulation leads to higher inflation: lower productivity coupled with larger margins results in higher consumer prices.

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File URL: http://www.eief.it/files/2012/09/wp-14-entry-barriers-in-retail-trade.pdf
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Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 0814.

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Length: 41 pages
Date of creation: 2008
Date of revision: Jul 2008
Handle: RePEc:eie:wpaper:0814
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