Shopping externalities and retail concentration: Evidence from dutch shopping streets

Hans R.A. Koster; Ilias Pasidis; Jos van Ommeren

doi:10.1016/j.jue.2019.103194

Shopping externalities and retail concentration: Evidence from dutch shopping streets

Hans R.A. Koster^*, Ilias Pasidis, Jos van Ommeren

^*Corresponding author for this work

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Abstract

Why do shops cluster in shopping streets? We argue that retail firms benefit from shopping externalities. We identify these externalities for the main Dutch shopping streets by estimating the effect of footfall – the number of pedestrians that pass by – and the number of shops in the vicinity on store owners’ rental income. We address endogeneity issues by exploiting spatial variation within shopping streets combined with historic long-lagged instruments. Our estimates imply an elasticity of rental income with respect to footfall as well as number of shops in the vicinity of (at least) 0.25. We show that these shopping externalities are unlikely to be internalised. It follows that substantial subsidies to shop owners are welfare improving, seemingly justifying current policies. Finally, we find limited evidence for heterogeneity between retail firms located in shopping streets in their willingness to pay for shopping externalities.

Original language	English
Article number	103194
Pages (from-to)	1-29
Number of pages	29
Journal	Journal of Urban Economics
Volume	114
Early online date	28 Sept 2019
DOIs	https://doi.org/10.1016/j.jue.2019.103194
Publication status	Published - Nov 2019

Funding

We thank Locatus and HISGIS for providing data. The editor Stuart Rosenthal, two anonymous referees, Sergej Gubin, Jordi Jofre-Monseny, Albert Soll?-Oll?, Jacques-Fran?ois Thisse and Elisabet Viladecans-Marsal are thanked for useful comments on earlier versions of this paper, as well as participants of seminars at the Baltic International Centre for Economic Policy Studies in Riga, the University of Barcelona, the Autonomous University of Barcelona, IDE-JETRO in Chiba (Japan), the London School of Economics and participants of the Urban Economics Association conferences in Copenhagen and Vienna. This paper has been prepared within the framework of the HSE University Basic Research Program and funded by the Russian Academic Excellence Project ?5-100?.

Funders	Funder number
HISGIS
IDE-JETRO in Chiba
Urban Economics Association
London School of Economics and Political Science
Universitat de Barcelona
Universitat Autònoma de Barcelona

Keywords

Agglomeration economies
Footfall
Rents
Retail
Shopping externalities
Vacancies

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jue.2019.103194

Shoppingexternalitiesandretailconcentration_EvidencefromdutchshoppingstreetsFinal published version, 3.02 MBLicence: Article 25fa Dutch Copyright Act

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title = "Shopping externalities and retail concentration: Evidence from dutch shopping streets",

abstract = "Why do shops cluster in shopping streets? We argue that retail firms benefit from shopping externalities. We identify these externalities for the main Dutch shopping streets by estimating the effect of footfall – the number of pedestrians that pass by – and the number of shops in the vicinity on store owners{\textquoteright} rental income. We address endogeneity issues by exploiting spatial variation within shopping streets combined with historic long-lagged instruments. Our estimates imply an elasticity of rental income with respect to footfall as well as number of shops in the vicinity of (at least) 0.25. We show that these shopping externalities are unlikely to be internalised. It follows that substantial subsidies to shop owners are welfare improving, seemingly justifying current policies. Finally, we find limited evidence for heterogeneity between retail firms located in shopping streets in their willingness to pay for shopping externalities.",

keywords = "Agglomeration economies, Footfall, Rents, Retail, Shopping externalities, Vacancies",

author = "Koster, {Hans R.A.} and Ilias Pasidis and {van Ommeren}, Jos",

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AU - van Ommeren, Jos

PY - 2019/11

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N2 - Why do shops cluster in shopping streets? We argue that retail firms benefit from shopping externalities. We identify these externalities for the main Dutch shopping streets by estimating the effect of footfall – the number of pedestrians that pass by – and the number of shops in the vicinity on store owners’ rental income. We address endogeneity issues by exploiting spatial variation within shopping streets combined with historic long-lagged instruments. Our estimates imply an elasticity of rental income with respect to footfall as well as number of shops in the vicinity of (at least) 0.25. We show that these shopping externalities are unlikely to be internalised. It follows that substantial subsidies to shop owners are welfare improving, seemingly justifying current policies. Finally, we find limited evidence for heterogeneity between retail firms located in shopping streets in their willingness to pay for shopping externalities.

AB - Why do shops cluster in shopping streets? We argue that retail firms benefit from shopping externalities. We identify these externalities for the main Dutch shopping streets by estimating the effect of footfall – the number of pedestrians that pass by – and the number of shops in the vicinity on store owners’ rental income. We address endogeneity issues by exploiting spatial variation within shopping streets combined with historic long-lagged instruments. Our estimates imply an elasticity of rental income with respect to footfall as well as number of shops in the vicinity of (at least) 0.25. We show that these shopping externalities are unlikely to be internalised. It follows that substantial subsidies to shop owners are welfare improving, seemingly justifying current policies. Finally, we find limited evidence for heterogeneity between retail firms located in shopping streets in their willingness to pay for shopping externalities.

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Shopping externalities and retail concentration: Evidence from dutch shopping streets

Abstract

Funding

Keywords

UN SDGs

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