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Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing

  • Maican, Florin

    ()

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Orth, Matilda

    ()

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Entry of large (“big-box”) stores along with a drastic fall in the total number of stores is a striking trend in retail markets. In this paper we provide a dynamic structural model, controlling for unobserved prices and local market characteristics, to estimate total factor productivity in retail markets. Then we evaluate how increased competition from large entrants influences incumbents’ productivity in local markets. Using detailed data on retail food stores in Sweden, we find that net entry substantially contributes to industry productivity growth. In local markets, productivity dispersion increases as a consequence of large entrants, i.e., low productive incumbents become less productive whereas high productive incumbents become more productive. We conclude that large entrants play a central role in explaining productivity differences across stores.

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File URL: http://hdl.handle.net/2077/18683
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Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 328.

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Length: 53 pages
Date of creation: 12 Nov 2008
Date of revision:
Handle: RePEc:hhs:gunwpe:0328
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Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden

Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/

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