Abstract

Retailing is a sizable sector of the economy – on a reasonable measure of employment the second largest industry in the UK. Land use policies in the UK have the effect of restricting the availability of land for retail; in addition ‘town-centre-first’ policy are designed to concentrate retail development on expensive central land and so increases the cost of retail space. After setting out some of the possible economic implications of these policies this paper uses a unique micro data set of store specific information to estimate the impact on productivity of space and the specific effects of planning restrictiveness on store size. It is the first paper to analyse the contribution of space to productivity and to relate that firmly to land use regulation policies. Our results suggest that productivity rises with store size and that planning restrictiveness by directly constraining store sizes and additionally by raising the price of space reduces productivity in retailing thereby increasing retail prices. JEL classification: D2, L51, L81, R32.