Working Paper Series
Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing
() and Matilda Orth
Abstract: Entry of large (“big-box”) stores along with a drastic
fall in the total number of stores is a striking trend in retail markets.
We use a dynamic structural model to estimate retail productivity in a
local market setting. In particular, we provide a general strategy of how
to measure the causal effect of entry of large stores on productivity
separate from demand. To control for endogeneity of large entrants, we use
political preferences. Using detailed data on all retail food stores in
Sweden, we find that large entrants force low productivity stores to exit
and surviving stores to increase their productivity. Productivity increases
most among incumbents in the bottom part of the productivity distribution,
and then declines with the productivity level of incumbents. When
controlling for prices, the impact of large entrants on productivity
increases substantially. Our findings suggest that large entrants play a
crucial role for driving productivity growth.
Keywords: Retail markets; Imperfect competition; Industry dynamics; Productivity; Dynamic structural model; (follow links to similar papers)
JEL-Codes: C24; L11; O30; (follow links to similar papers)
59 pages, January 18, 2012
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