Working Paper: CEPR ID: DP6713
Authors: Rachel Griffith; Heike Harmgart
Abstract: We are interested in evaluating the impact of restrictive planning regulation on entry into the UK grocery retail industry. We estimate a model similar to Bresnahan and Reiss (1991) where we allow for multiple store formats. We find that more restrictive planning regulation reduces the number of large format supermarkets in equilibrium. However, the impact is overstated if variation in demographic characteristics across markets is not also controlled for. Our estimates suggest that restrictive planning regulation leads to a loss to consumers of up to £10m per annum. This cost must be offset against any benefits that arise, e.g. due to reduced congestion.
Keywords: entry; land use regulation; retail
JEL Codes: L11; L52; L81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Restrictive planning regulations (R38) | Number of large format supermarkets (L81) |
| Percentage increase in approval rate of planning applications (R58) | Number of large supermarkets (L81) |
| Increase in unemployment rate (F66) | Number of large supermarkets (L81) |
| Restrictive planning regulations (R38) | Higher food prices (Q11) |
| Restrictive planning regulations (R38) | Loss to consumers of up to £10 million per annum (D18) |