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The Decline of Small Cities: Increased Competition from External Shopping Malls or Long-Term Negative Trends?

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  • Daunfeldt, Sven-Olov

    (Institute of Retail Economics (Handelns Forskningsinstitut))

  • Mihaescu, Oana

    (Institute of Retail Economics (Handelns Forskningsinstitut))

  • Rudholm, Niklas

    (Institute of Retail Economics (Handelns Forskningsinstitut))

Abstract

We use the entry of 17 external shopping malls in Sweden to investigate how they have affected the performance of incumbent firms located in the city centres of small cities. We find that entry by external shopping malls decreased labour productivity for incumbent firms in city centres by -5.31%. However, when using time-specific fixed effects to control for common time trends in retailing in small cities, the impact on labour productivity, revenues, and number of employees due to the entry of external shopping malls becomes insignificant. The negative impact on incumbent firms is thus not due to the entry of external shopping malls but rather due to long-term negative economic trends in these cities.

Suggested Citation

  • Daunfeldt, Sven-Olov & Mihaescu, Oana & Rudholm, Niklas, 2020. "The Decline of Small Cities: Increased Competition from External Shopping Malls or Long-Term Negative Trends?," HFI Working Papers 10, Institute of Retail Economics (Handelns Forskningsinstitut).
    • Handle: RePEc:hhs:hfiwps:0010
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    More about this item

    Keywords

    external shopping malls; city centre; firm performance; agglomeration economies; competition; difference-in-differences;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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