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Local Retail Prices, Product Varieties and Neighborhood Change

Author

Listed:
  • Fernando Borraz

    (Banco Central del Uruguay
    Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República
    Universidad de Montevideo)

  • Felipe Carozzi

    (Department of Geography and the Environment. London School of Economics)

  • Nicolás González-Pampillón

    (What Works Centre for Local Economic Growth - LSE
    Institut d’Economia de Barcelona (IEB).)

  • Leandro Zipitría

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

We study how retail prices within a city are affected by changes in local housing markets. Our empirical strategy is based on an exogenous shift in the spatial distribution of the construction activity induced by a large-scale, place-based tax exemption in the city of Montevideo. We provide differences-in-differences and instrumental variable estimates showing that the price of retail goods decreases in areas within the city that experience more residential development. We use a multi-product model of imperfect competition to relate this change to an expansion in either product varieties or firm entry. We report evidence in support of the varieties channel, with new development causing an increase in the number of varieties available locally. Our results have implications for urban planning policy and the broader discussion about winners and losers from neighborhood change.

Suggested Citation

  • Fernando Borraz & Felipe Carozzi & Nicolás González-Pampillón & Leandro Zipitría, 2021. "Local Retail Prices, Product Varieties and Neighborhood Change," Documentos de trabajo 2021013, Banco Central del Uruguay.
    • Handle: RePEc:bku:doctra:2021013
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    File URL: https://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/13.3021.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Bhardwaj,Abhishek & Ghose,Devaki & Mukherjee,Saptarshi & Singh,Manpreet, 2022. "Million Dollar Plants and Retail Prices," Policy Research Working Paper Series 9995, The World Bank.

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    More about this item

    Keywords

    Retail Prices; Housing Stock; Neighborhood Change;
    All these keywords.

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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