Entry Barriers in Retail Trade
Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Einaudi Institute for Economics and Finance (EIEF)
Bank of Italy
CEPR Discussion Paper No. DP6637
The 1998 reform of the Italy's 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 firms' performance for a representative sample of retailers. 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 substantially lower productivity of incumbent firms. Liberalizing entry has a positive effect on investment in ICT. Consistently, more stringent entry regulation results in higher inflation: lower productivity coupled with larger margins results in higher consumer prices.
Number of Pages in PDF File: 35
Keywords: Entry barriers, productivity growth, technology
JEL Classification: L11, L5, L81
Date posted: June 5, 2008
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