Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 898: Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing

Florin Maican () and Matilda Orth ()
Additional contact information
Florin Maican: Department of Economics, Postal: School of Business, Economics and Law, University of Gothenburg,
Matilda Orth: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: The entry of large (“big-box”) stores and the accompanying drastic decrease in the overall number of stores represent a striking trend in retail. We use a dynamic model to measure the impact of the entry of large stores on incumbents’ productivity separate from demand while accounting for local markets and the endogeneity of entry. Using data on all retail food stores in Sweden, we find that incumbents’ productivity increases after the entry of large stores and that the magnitude of the increase declines toward the upper part of the productivity distribution. Our findings highlight that large entrants play a crucial role in driving productivity.

Keywords: Retail markets; Imperfect competition; Industry dynamics; Productivity; Dynamic structural model

JEL-codes: C24; L11; L50; L81; O30

72 pages, First version: January 18, 2012. Revised: August 31, 2015. Earlier revisions: December 11, 2014.

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