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Legal and political barriers to entry in the Spanish retail market: a frontier approach

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  • Orea, Luis

Abstract

Recent studies have shown that barriers to entry for large retail establishments in Spain have been increased in the last decade. We exploit a unique dataset derived from an extensive analysis of the location of each large retail establishments in Spain to test whether the entry of large retail establishments was effectively limited by regional regulation and whether it depends on the approval policy of both municipal and regional authorities. To achieve this aim we merge the literatures on stochastic production frontiers and on barriers to entry by estimating a frontier entry model, which allows us to get market-specific estimates of entry costs. We have found that entry costs have decreased the number of large establishments in a 27%. A 17% of this inefficiency is explained by regional legislation (in particular, taxes and outright bans) and the entry deterrence though the approval policy of both municipal and regional authorities. The existence of significant differences among local markets discourages using regional data to analyze entry cost and barriers to entry in the Spanish retail industry.

Suggested Citation

  • Orea, Luis, 2009. "Legal and political barriers to entry in the Spanish retail market: a frontier approach," Efficiency Series Papers 2009/03, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    • Handle: RePEc:oeg:wpaper:2009/03
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    File URL: https://www.unioviedo.es/oeg/ESP/esp_2009_03.pdf
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    More about this item

    Keywords

    Barriers to entry; retail distribution; regulation; frontier analysis;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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