1. www.CeRiBA.org.uk Regulation and UK Retailing Productivity: Evidence from Microdata Jonathan Haskel Raffaella Sadun QMUL, LSE, CeRiBA and AIM Berlin Sept 2006 C e ntre for Research into Business Activity

2. RETAIL PRODUCTIVITY: US-UK COMPARISON Source: Euklems Database Persistent differences in productivity LEVELS

3. RETAIL PRODUCTIVITY: US-UK COMPARISON Source: Euklems Database Since Late 90’s: differences in productivity GROWTH 1. Retail Annualised Log Growth Rate (95-03): USA: 6% UK : 3% 2. Retail Contribution to country level TFP accel (95-01): USA: +2/3 UK: -1/3

4. How much can regulation explain this? Facts a. Change in regulation : pre-1996, big box store building : post-1996, development in town b. Change in store profile : post 1996, large chains opened smaller stores Research questions a. Has planning change  smaller stores? {Yes, Sadun, 2006, ODPM data plus ARD} b. Does decline in store size mean falling TFPG? c. (If smaller stores need more co-ordination with ICT does this explain poor returns from ICT?)

5. GENERAL PLANNING GUIDELINES: A BRIEF HISTORY Timeline First reform Out of town centre building fairly free Second reform “Sequential approach”. “The first preference should be for town centre sites, followed by edge-of-centre, district and local centres and only then out-of-centre sites in locations Ministerial Clarification Reaffirms 1996 reform, conservative approach 1980s 1996 1999

6. New floorspace in town centres

7. ARD data on retailing a. Use RU level data for input and outputs b. Use LU data for the composition of the RUs example: match RU with all their LUs calc median employ of LUs calc % emp below median emp Some data issues a. Capital stock b. Takeovers c. What is output in retailing? d. Interpreting macro results (GVA/margins/double deflation etc.) Data

8. Basic data for UK retailing

9. Changes in shop distribution

10. Size distribution of shops in detail: large chains

12. Theory

13. Production functions

14. Regressions: dependent ln_Y, all retailing, 7,469 obs

19. Regressions: by sector

20. Growth accounting

21. Summary Argument: regulation change  small stoes  productivity falls Evidence: a. Fall in store size within chains b. Associated with fall in productivity, controlling for other factors c. Accounting: a. Actual TFP growth was 0.07%pa b. No fall in shop size: TFP growth would have been 0.25%pa, c. this is  20% of the post-1995 slowdown in UK retail TFP growth