Spatial Frictions in Retail Consumption

This paper analyzes spatial consumption frictions by estimating the causal effect of store openings on individual shopping behavior. To this end, we combine unique household-store-linked transaction data with administrative data on income and other socio-demographics. Our findings reveal that spatial frictions significantly influence shopping behavior, with the distance elasticity of expenditures and number of visits being approximately 0.15. Our estimates suggests that consumption areas extend to about 10-20 minutes of travel time, depending on household type. Traditional gravity estimates are shown to be considerably biased due to the endogenous nature of store locations. By combining distance elasticities with a simple model of shopping behavior, we derive store-specific attraction parameters and compute a measure of local grocery market access. Market access varies significantly across different locations, and consistent with spatial equilibrium theory, this variation is reflected in local rents. Consumption frictions are more pronounced for older and smaller households and vary with income, primarily in non-urban areas. Overall, spatial variations in market access are more significant than spatial dispersion in income. Combined with the positive correlation between income and market access, this suggests an important role for real income disparities.