Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 123: Comparison and one-stop shopping after big-box retail entry: A spatial difference-in-difference analysis

Mengije Han , Oana Mihaescu (), Yujiau Li and Niklas Rudholm
Additional contact information
Mengije Han: Dalarna University, Postal: School of Technology and Business Studies, Statistics, 791 88 Falun, Sweden
Oana Mihaescu: HUI Research, Postal: HUI Research, Regeringsgatan 60, 103 29 Stockholm, Sweden
Yujiau Li: Dalarna University, Postal: School of Technology and Business Studies Statistics, 791 88 Falun, Sweden
Niklas Rudholm: HUI Research, Postal: HUI Research, Regeringsgatan 60, 103 29 Stockholm, Sweden

Abstract: This paper empirically measures the potential spillover effects of big-box retail entry on the productivity of incumbent retailers in the entry regions, and investigates whether the effects differ depending on 1) if the entry is in a rural or urban area, and 2) if the incumbent retailers are within retail industries selling substitute or complement goods to those found in IKEA. To identify the IKEA-entry effect, a difference-in-difference model is suitable, but traditionally such estimators neglect the possibility that firms’ sales are determined by a process with spatially interactive responses. If ignored, these responses may cause biased estimates of the IKEA entry effect due to spatial heterogeneity of the treatment effect. One objective of this paper is thus to propose a spatial difference-in-difference estimator accounting for possible spatial spillover effects of IKEA entry. Particular emphasis is placed on the development of a suitable weight matrix accounting for the spatial links between firms, where we allow for local spatial interactions such that the outcome of observed units depends both on their own treatment as well as on the treatment of their neighbors. Our results show that for complementary goods retailers (or onestop shopping retailers) in Haparanda and Kalmar, productivity increased by 38% and 19%, respectively, due to IKEA entry. No statistically significant effects were found for the entries in Karlstad and Gothenburg, indicating that it is mainly incumbents in smaller entry regions that benefit from IKEA entry. Also, for incumbent retailers selling substitute (or comparison shopping) goods no significant effects were found in any of the entry regions, indicating that it is mainly retailers selling complementary goods that benefit from IKEA entry. Finally, our results also show that ignoring the possibility of spatially correlated treatment effects in the regression models reduces the estimated impact of the IKEA entries in Haparanda and Kalmar on productivity in one-stop shopping retail firms with 3 and 0.6 percentage points, respectively.

Keywords: Big-box entry; Production functions; Retail productivity; Retail entry subsidies; Spatial difference-in-difference

JEL-codes: D22; L11; L25; L26; P25

27 pages, June 28, 2017

Full text files

BinaryLoader.axd?Own....pdf&Attachment=True PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Helena Nilsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-02-05 20:50:25.