Shops and the City: Evidence on Local Externalities and Local Government Policy from Big-Box Bankruptcies

Daniel Shoag; Stan Veuger

doi:10.1162/rest_a_00703

← Search

Shops and the City: Evidence on Local Externalities and Local Government Policy from Big-Box Bankruptcies

Daniel Shoag¹; Stan Veuger²

¹ Harvard Kennedy School · ² American Enterprise Institute

The Review of Economics and Statistics 2018

We report three findings. First, using evidence from chain bankruptcies and data on 12 million to 18 million establishments per year, we show that large retailers produce significant positive spillovers. Second, local governments respond to the size of these externalities. When a town’s boundaries allow it to capture a larger share of retail spillovers, it is more likely to offer retail subsidies. Third, these subsidies partially crowd out private sector mechanisms that also subsidize large retailers, such as shopping malls. These facts provide powerful evidence of the Coase theorem at work and highlight a concern for local development policies even when externalities can be targeted.

DOI: 10.1162/rest_a_00703
Volume: 100 (3)
Pages: 440-453
Language: en
Export: BibTeX
Sources: openalex crossref