Is the ‘Shop Around the Corner’ a Luxury or a Nuisance? The Relationship between Income and Neighborhood Retail Patterns

Abstract

Affluent neighborhoods present a potentially attractive location for retail establishments because of their higher purchasing power and demand for a wide range of specialized goods and services. However, if high income households perceive retail in general – or certain types of retail, such as Big Box stores – as an undesirable use, they may be able to block commercial development through zoning and the political process. In this paper we shed light on these issues by examining the relationship between neighborhood income and several different types of retail presence for 58 large U.S metropolitan areas. We combine detailed data from the National Establishment Time-Series database on retail establishments and employment, by industry category and firm type, with Census data on ZCTA income and demographics. Results indicate that retail density varies with income for certain retail types, such as food service and chain supermarkets and drugstores. In addition, average establishment size increases with income for all retail types. Retail density increases with population density, as expected, and decreases with distance to CBD and with share of owner-occupied housing.

Keywords: retail employment, firm location, commercial land use, neighborhood income, chain stores, neighborhood amenities

JEL Classification: R00, R12, R22, R33