Land Use Regulation and Productivity – Land Matters Land Use Regulation and Productivity – Land Matters: Evidence from a Uk Supermarket Chain

We use unique store-specific data for a major UK supermarket chain to estimate the impact of planning, which restricts both the size and location of stores, on store output. Using the quasi-natural experiment of the variation in planning policies between England and other UK countries and a difference-in-difference approach, we isolate the impact of Town Centre First (TCF) policies. We find that space contributes directly to the productivity of stores and planning policies in England directly reduce output both by reducing store sizes and forcing stores onto less productive sites. Our results suggest that since the late 1980s planning policies have imposed a loss of total output of at least 18.3 to 24.9%. This is equivalent to more than a ‘lost decade’ of output growth in a major sector generated directly by government policy. JEL codes: D2, L51, L81, R32. Submitted: May 2, 2012 Word count: 10476 (text) a) London School of Economics and Spatial Economics Research Centre b) Universitat Rovira i Virgili and Spatial Economics Research Centre Corresponding author: Paul Cheshire, Dept. of Geography & Environment, London School of Economics, Houghton St, London WC2A 2AE, U.K., fax +44 (0)20 7955 7412, phone: +44 (0)20 7955 7586, [email protected]. LAND USE REGULATION AND PRODUCTIVITY – LAND MATTERS 2 LAND USE REGULATION AND PRODUCTIVITY – LAND MATTERS: EVIDENCE FROM A UK SUPERMARKET CHAIN Abstract We use unique store-specific data for a major UK supermarket chain to estimate the impact of planning, which restricts both the size and location of stores, on store output. Using the quasi-natural experiment of the variation in planning policies between England and other UK countries and a difference-in-difference approach, we isolate the impact of Town Centre First (TCF) policies. We find that space contributes directly to the productivity of stores and planning policies in England directly reduce output both by reducing store sizes and forcing stores onto less productive sites. Our results suggest that since the late 1980s planning policies have imposed a loss of total output of at least 18.3 to 24.9%. This is equivalent to more than a ‘lost decade’ of output growth in a major sector generated directly by government policy. JEL codes: D2, L51, L81, R32.We use unique store-specific data for a major UK supermarket chain to estimate the impact of planning, which restricts both the size and location of stores, on store output. Using the quasi-natural experiment of the variation in planning policies between England and other UK countries and a difference-in-difference approach, we isolate the impact of Town Centre First (TCF) policies. We find that space contributes directly to the productivity of stores and planning policies in England directly reduce output both by reducing store sizes and forcing stores onto less productive sites. Our results suggest that since the late 1980s planning policies have imposed a loss of total output of at least 18.3 to 24.9%. This is equivalent to more than a ‘lost decade’ of output growth in a major sector generated directly by government policy. JEL codes: D2, L51, L81, R32. Submitted: May 3, 2012 Word count: 10476 (text) LAND USE REGULATION AND PRODUCTIVITY – LAND MATTERS 1 LAND USE REGULATION AND PRODUCTIVITY – LAND MATTERS: EVIDENCE FROM A UK SUPERMARKET CHAIN