We measure productivity in retailing and analyze the effects of entry of ”big box” stores on local markets.
||Matilda Orth and Florin Maican, IFN and University of Gothenburg
The major structural change in retail markets during the last few decades is entry of large (big-box) stores along with a drastic fall in the number of stores. The most striking example is the expansion of Wal-Mart, which has been found to greatly lower retail prices and increase exit of retail stores in the U.S., the “Wal-Mart effect”. Retail markets in Europe also follow the big-box trend, though on a smaller scale, with for example Carrefour, Metro, Schwartz and Tesco. Although there is an emerging literature about retail markets, the impact of this structural change on productivity has not been given much attention. This project deals with how to measure multi-factor productivity in retail markets and evaluate the effect of entry of large big-box stores on exit and the productivity distribution of incumbent stores in local markets. The project stresses key features of retail markets and highlights trade-offs involved given data typically available in retail applications. A central contribution is that we provide a dynamic framework for how to consider that stores have market power and compete in local markets. The project has a direct link to competition policy as entry of new stores is regulated.
The project is financed by a grant from the Swedish Competition Authority.
Maican, Florin and Matilda Orth (2012). "A Dynamic Analysis of Regulation and Productivity in Retail Trade". IFN Working Paper No. 939. Link
Maican, Florin and Matilda Orth (2012). "Productivity Dynamics and the Role of 'Big-Box' Entrants in Retailing." IFN Working Paper No. 898. Link