Project

The impact of retail trade on place attractiveness

Goal: The aim of this project is to develop a deeper understanding of whether access to retail affects the attractiveness of a location. Do large retailers have the power to affect place attractiveness in the regions that they enter? Are city centers impacted differently compared to suburbs? Do the impacts vary in urban and rural regions? Although these questions are immensely policy relevant, and their answers can potentially be used by the sector actors as well as decision makers at the local and national scale, they are largely left unanswered and are therefore central to the project we propose.

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Oana Mihaescu
added a research item
Opponents of big-box entry argue that large retail establishments generate noise and other types of pollution and a variety of negative externalities associated with traffic. Big-box advocates, on the other hand, argue that access to a large retail market delivers not only direct economic benefits but also a variety of positive spillover effects and therefore can be considered a consumer amenity that increases the attractiveness of the entry location. To test the validity of these competing arguments, we use the entry of IKEA in Sweden as a quasi-experiment and empirically investigate whether increased access to retail affects place attractiveness, which is proxied by residential property values. We find that IKEA entry increases the prices of the properties sold in the entry cities by, on average, 4.4% or 60,425 SEK (approximately 6,400 USD), but this effect is statistically insignificant for the properties in the immediate vicinity of the new IKEA retail trade area. In addition, we observe an attenuation of the effect with distance from the new IKEA store and the associated retail trade area, where the properties located 10 km away experience a 2% price increase. Our results are in line with some previous findings regarding the effects of entry by Walmart or supermarket stores in the US and show that large retailers have the potential to increase place attractiveness, but perhaps not in the immediate vicinity of the new establishment.
Oana Mihaescu
added a project goal
The aim of this project is to develop a deeper understanding of whether access to retail affects the attractiveness of a location. Do large retailers have the power to affect place attractiveness in the regions that they enter? Are city centers impacted differently compared to suburbs? Do the impacts vary in urban and rural regions? Although these questions are immensely policy relevant, and their answers can potentially be used by the sector actors as well as decision makers at the local and national scale, they are largely left unanswered and are therefore central to the project we propose.