Local Retail Prices, Product Variety, and Neighborhood Change

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

American Economic Journal: Economic Policy, 2024, vol. 16, issue 1, 1-33

Abstract: We study how local grocery markets within a city are affected by changes in housing markets. Our empirical strategy exploits a shift in the spatial distribution of construction activity induced by a large-scale, place-based tax exemption in the city of Montevideo. The introduction of new housing stock induced by the policy causes a reduction in grocery prices of 2.3 percent and an increase in locally available product varieties. Using insights from a multiproduct model of imperfect competition and estimates for different types of stores, we show these changes are the result of incumbents' response to an increase in local demand.

JEL-codes: L81 O18 R22 R23 R31 R38 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/pol.20210817

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