Working Paper: CEPR ID: DP6637
Authors: Fabiano Schivardi; Eliana Viviano
Abstract: 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.
Keywords: entry barriers; productivity; growth; technology
JEL Codes: L11; L5; L81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher entry barriers (D43) | Larger profit margins for incumbent firms (D43) |
| Stricter entry regulations (Z38) | Lower productivity levels (O49) |
| Liberalizing entry (F29) | Positive influence on ICT investment (O16) |
| Higher entry barriers (D43) | Increased consumer prices (E31) |