Land Use Regulation and Retail: Space Constraints and Total Factor Productivity. Paul Cheshire, Christian Hilber and Ioannis Kaplanis. ERES Conference, Milan 24 th June 2010. This paper: hypotheses & intended contribution.
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Land Use Regulation and Retail:
Space Constraints and Total Factor Productivity
Paul Cheshire, Christian Hilber and Ioannis Kaplanis
ERES Conference, Milan
24th June 2010
1) estimating production function - including space
2) Investigating connection to differences in planning restrictiveness
3) Quantify impact on TFP and retail prices
1)Restriction of land supply for retail raises prices and cause profit maximising retailers to substitute land out of production
2) ‘Town centre first policies’ may force to locate on smaller and less productive, higher cost ( for logistics, labour, customers) sites
At this stage not distinguishing
Forget land (unless agricultural economist)
But land an input into production – in retailing: think Ikea!!
=> so increases volatility
Much higher in UK than continental Europe or New York
=> more politicised, less planned
Well worth looking at: access to store level micro data for 4 main supermarket groups
Strong finding larger stores more productive and profitable
More local competition reduces store prices (CC 2008)
And land for retail in UK x 5 to 10 in France (CC 2000)
-More or less prohibited out of town development for all ‘town centre’ activities – i.e. not just retail but offices, leisure, restaurants
-Introduced ‘Needs’ test + ‘Sequential’ test
Figure 1: Number of Applications for Major
Retail Developments, 1979-2008
Figure 2: Applications for Extensions to Foodstores, 1990 to 2001
Big 5 Supermarkets
In- and Out of
rise relative to out-
But note in- or out-
of centre defined
Figure 4: Age of Building Stock by Use Category
And an aging stock of retail buildings….
Table 2 Summary Statistics
Figure 5: Plotting the coefficients from regressing
refusal rate on delay rate: Residential (major) 1979-2008
Figure 6: Plotting the coefficients from regressing refusal rate
on delay rate: Retail (major) 1979-2008
- so more
Table 3a Number of stores and average floorspace
by ‘location type’
Only ‘Destination’ stores clearly larger on average
Table 3b Floorspace costs by ‘location type’
But unit price of ‘Destination’ stores highest: town centre
cheapest - contrast with distance decay of price in Reading 1984
No detailed info on margins but assured they are constant
by item across stores. So using sales as measure of ‘output’
Elasticity 0.1 to 0.13
Characteristics of catchment area
Age of store (date of opening)
Impact of store age is interesting/suggestive – using estimates
from model (9) =>Oldest stores least productive (no surprise)
but productivity falls cet. par. in stores founded from late 1980s
And falls strongly thereafter. Looks like PPG6 ….
(note major retail numbers can be small and seem noisy)
Notes: The dependent variable is log(net floorspace). The sample excludes non-food formats.
The sample is restricted to the stores that are located in England – only regulation data collected
The refusal rate is calculated as the ratio of declined major residential projects applications to the
total number of applications and averaged over 1979-2008 ; t-statistics in parentheses
Notes: The dependent variable is log(net floorspace). The sample excludes non-food formats. t-statistics in parentheses. The sample is restricted to the stores that are located in England – only planning data collected.
refusal rate: ratio of declined major retail project applications to the total number of
applications and averaged over 1980-2008 (the period for which regulation data exist).
delay rate: change in the average delay ratio of applications pending for more than 13 weeks between the period 1994-98 and the period 2004-2008.
=>Increases resource use in retail and raises retail prices