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Industry Structure of Commercial Districts and the Impact of COVID-19

Author

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  • Sung Hyo Hong

    (Economics Department, Kongju National University, Gongju 32588, Republic of Korea)

  • Junhong Im

    (Department of Urban∙Rural & Culture Research, Chungnam Institute, Gongju 32589, Republic of Korea)

  • Gyoungju Lee

    (Department of Urban and Transportation Engineering, Korea National University of Transportation, Chungju 27469, Republic of Korea)

Abstract

This paper aims to empirically analyze the difference in the closure rate of the commercial district according to the industry structure of the commercial district. Theoretically, the larger the number of stores in a commercial district, the greater the positive externality caused by the agglomeration economies in consumption, namely, the external economies of scale. However, the agglomeration economies could occur from comparison shopping or one-stop shopping, depending on the business structure of the commercial district. According to the empirical results of the regression analysis of all 1164 commercial districts in Korea, the more specialized a commercial district is by stores in a specific industry, the lower the closure rate of that commercial district. This means that the agglomeration economies in consumption are driven by comparison shopping rather than by one-stop shopping and implies that it is necessary to introduce incentives that allow stores in the same industry to cluster together in terms of policy. Meanwhile, if the closure is limited to a specific industry, it will cause an endogeneity problem since it affects the industry structure of the commercial district. Considering this, as a result of additional estimation by 2SLS and GMM using instrumental variables, the error in estimation due to the endogeneity problem was not large, confirming that COVID-19 corresponds to an overall external shock that is not limited to a specific industry. In addition, this paper presents diagnostic indicators for commercial districts to measure the impact of COVID-19. Through this, it will be possible to alleviate conflicts between social classes over compensation or subsidies for sanctions for quarantine. To the best of our knowledge, it is the first time to use all commercial districts in Korea for a research in evaluating the impact of COVID-19, and empirical results on agglomeration economies focusing on the consumption side are limited.

Suggested Citation

  • Sung Hyo Hong & Junhong Im & Gyoungju Lee, 2023. "Industry Structure of Commercial Districts and the Impact of COVID-19," Sustainability, MDPI, vol. 15(11), pages 1-11, May.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:11:p:8905-:d:1161151
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    References listed on IDEAS

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