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Land Use Regulation & Retail: Space Constraints and Total Factor Productivity


  • Paul Cheshire


  • Christian Hilber


  • Ioannis Kaplanis


Introductory economics tells us there are three factors of production: land, labour and capital. Unless a student of agricultural economics, land as a factor of production will never be mentioned again. Yet space for some industries is a significant input and that would seem to be true of retailing. This is a sizable sector of the economy - on a reasonable measure of employment the second largest industry in the UK. Land use policies in the UK have the effect of restricting the availability of land for retail; in addition 'town-centre-first' policy concentrates retail development on expensive central land and so increases the cost of retail space. In British cities in the mid 1980s the most expensive land for retail was 250 times as expensive as the most expensive retail land in comparable US cities. This paper uses a unique micro data set of store specific information to estimate the impact on productivity of space and the specific effects of planning restrictiveness on the productivity of retailing. It is the first paper to analyse the contribution of space to productivity and to relate that firmly to land use regulation policies. Our results suggest that TFP rises with store size and that planning restrictiveness directly reduces productivity in retailing thereby increasing retail prices. JEL classification: D2, L51, L81, R32. Keywords: Land use regulation, regulatory costs, firm productivity, retail

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  • Paul Cheshire & Christian Hilber & Ioannis Kaplanis, 2011. "Land Use Regulation & Retail: Space Constraints and Total Factor Productivity," ERSA conference papers ersa10p1084, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa10p1084

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    References listed on IDEAS

    1. Paul C. Cheshire & Christian A.L. Hilber, 2008. "Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge," Economic Journal, Royal Economic Society, vol. 118(529), pages 185-221, June.
    2. Jonathan Haskel & Raffaella Sadun, 2012. "Regulation and UK Retailing Productivity: Evidence from Microdata," Economica, London School of Economics and Political Science, vol. 79(315), pages 425-448, July.
    3. Mayo, Stephen & Sheppard, Stephen, 2001. "Housing Supply and the Effects of Stochastic Development Control," Journal of Housing Economics, Elsevier, vol. 10(2), pages 109-128, June.
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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis


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