Shopping externalities and retail concentration: Evidence from dutch shopping streets

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

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

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 languageEnglish
Article number103194
Pages (from-to)1-29
Number of pages29
JournalJournal of Urban Economics
Volume114
Early online date28 Sep 2019
DOIs
Publication statusPublished - Nov 2019

Keywords

  • Agglomeration economies
  • Footfall
  • Rents
  • Retail
  • Shopping externalities
  • Vacancies

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