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Entry barriers in retail trade (2007)
| Venue: | Economic Journal, TD No |
| Citations: | 40 - 1 self |
BibTeX
@ARTICLE{Schivardi07entrybarriers,
author = {Fabiano Schivardi and Eliana Viviano},
title = {Entry barriers in retail trade},
journal = {Economic Journal, TD No},
year = {2007}
}
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Abstract
The 1998 reform of the Italian retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on sectoral performance. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and lower productivity of incumbent firms. Liberalising entry has a positive effect on investment in ICT, increases employment and compresses labour costs in large shops. In areas with more stringent entry regulation, lower productivity coupled with larger margins results in higher consumer prices. Liberalisation is arguably the most strongly advocated policy for improving economic performance, particularly in many service activities, where legal barriers to competition are widespread. Indeed, there is a consensus that anti-competitive regulation is the main cause of the US–Europe difference in productivity growth in the service sector in the recent years.1 This article considers the effects of entry regulation in the Italian retail trade sector. In addition to gaining insights on the effects of regulation in services in general, studying retail trade is of interest in itself. This sector employs approx-
Keyphrases
entry barrier retail trade italian retail trade sector recent year stringent entry regulation productivity growth positive effect consumer price main cause profit margin labour cost many service activity large shop political variable anti-competitive regulation service sector area-wide shock economic performance entry regulation advocated policy regional government large store sectoral performance u europe difference incumbent firm legal barrier margin result local variation
