Local retail prices, product varieties and neighborhood change

Fernando Borraz, Felipe Carozzi, Nicolás González-Pampillón () and Leandro Zipitria

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We study how local grocery prices within a city are affected by changes in housing markets. Our empirical strategy is based on an exogenous shift in the spatial distribution of construction activity induced by a large-scale, place-based tax exemption in the city of Montevideo. We provide instrumental variable estimates showing that the relative price of grocery goods decreases in areas within the city that experience more residential development: the estimated elasticity of grocery prices to newly-built residential space lies between -3 and -4%. Using a multi-product model of imperfect competition, we show that this negative effect can result from either an expansion in product varieties or firm entry. We report evidence supporting the varieties channel, with new residential development causing an increase in varieties of groceries available locally, and evidence of changes in the composition of stores.

Keywords: retail prices; housing stock; neighborhood change (search for similar items in EconPapers)
Date: 2022-01-20
New Economics Papers: this item is included in nep-ure
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https://cep.lse.ac.uk/pubs/download/dp1822.pdf (application/pdf)

Related works:
Working Paper: Local retail prices, product varieties and neighborhood change (2022)
Working Paper: Local Retail Prices, Product Varieties and Neighborhood Change (2021)
Working Paper: Local Retail Prices, Product Varieties and Neighborhood Change (2021)
Working Paper: Local Retail Prices, Product Varieties and Neighborhood Change (2021)
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