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The Effect of Large-Scale Retailers on Price Level: Evidence from Japanese data for 1977-1992

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  • Katsumi SHIMOTSU

Abstract

Since its enactment in 1974 until its easing in the 1990s, the Large-Scale Retail Store Law ( Daikibo Kouri Tenpo Ho ) strictly regulated the entry of large-scale retailers in cities in Japan to protect local small and medium incumbent stores. This paper investigates the effect of large-scale retailers on the price level in Japan using city-level panel data from 1977 to 1992, the period when the Large-Scale Retail Store Law exercised strong entry restrictions. Using fixed effects estimation and instrumental variable estimation, we find that the presence of large-scale retailers, measured by their floor area relative to that of all of the retailers, has a negative effect on the price index of agricultural products, mass-produced food products, textiles, and durable goods. The estimation results suggest that a 10% increase in the relative floor area of large-scale retailers reduces the price level by around 0.3%-1.3%.

Suggested Citation

  • Katsumi SHIMOTSU, 2014. "The Effect of Large-Scale Retailers on Price Level: Evidence from Japanese data for 1977-1992," Discussion papers 14013, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:14013
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    References listed on IDEAS

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    1. Toshiyuki MATSUURA & Saki SUGANO, 2009. "The Effect of Relaxation of Entry Restrictions for Large-Scale Retailers on SME Performance: Evidence from Japanese Retail Census," Discussion papers 09054, Research Institute of Economy, Trade and Industry (RIETI).
    2. Naohito Abe & Daiji Kawaguchi, 2010. "Incumbent's Price Response to New Entry: The Case of Japanese Supermarkets," NBER Chapters, in: Sticky Prices and Inflation Dynamics (NBER-TCER-CEPR), pages 196-212, National Bureau of Economic Research, Inc.
    3. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 431-434, November.
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