Mitsukuni Nishida

Estimating a Model of Strategic Network Choice: The Convenience-Store Industry in Okinawa

This paper investigates a determinant of location choice for multistore retailing firms: the trade-off between the business-stealing effect and the cost-saving effect from clustering their own stores. I present an empirical model of network choice by two multistore firms. I use lattice-theoretical results to address the computational burden of solving for an equilibrium in store networks. The framework integrates the static entry game of complete information with post-entry outcome data while using simulations to correct for the selection of entrants. I present an application of the model to the case of the convenience store industry in Okinawa Island, Japan, using unique cross-sectional data on store networks and revenues. I use parameter estimates to examine the impact of a hypothetical horizontal merger on store configurations, costs, and profits. Results suggest a retailers trade-off between cost savings and lost revenues from clustering its stores is positive across markets and negative within a market. I find an acquirer of a hypothetical merger of two multistore firms would decrease its number of stores in suburbs but increase its number in the city center.

The Costs of Zoning Regulations in Retail Chains: The Case of the City Planning Act of 1968 in Japan

The deregulation of zoning restrictions on retailers has been at the forefront of urban policy debates in recent years. Despite the increasing attention, however, we know surprisingly little about how the zoning regulations, which impose a constraint on the supply of land for a particular use, affect retailers in urban areas. This paper examines the effect of the zoning regulations introduced in 1968 in Japan on entry of convenience-store outlets. The act specifies two zoning restrictions for retail outlets. First, the law prohibits building commercial outlets in specified residential and industrial areas (“type 1 zoning”). Second, the law requires a developer to obtain permission from the local government to develop an outlet in specified areas (“type 2 zoning”). To account for the spatial dependence in demand, costs, and zoning regulation status across markets, this paper employs an equilibrium model of store-network choice by multistore firms. Using the cross-sectional data of entry and zoning in Okinawa in 2002, the paper finds hypothetically eliminating the type 1 and type 2 regulations would increase the total number of convenience-store outlets by 10–14 and 2–3 %, respectively. Although the magnitude of the increase in store counts and sales are similar across two national chains in Okinawa, the geographical markets in which each firm increases its outlets after the deregulation differ across these two chains.

Explaining Reallocation's Apparent Negative Contribution to Growth

We explain a puzzle from two recent meta-analyses that cover 25 countries and claim to show that inputs systematically move from higher-value to lower-value activities despite strong aggregate labor productivity growth (ALP). These papers use variants of the Baily, Hulten and Campbell (1992) decomposition of ALP to show that the reallocation covariance term is negative in all but two countries and the reallocation between term is negative in nine countries and weakly positive in most others. We decompose ALP using three micro-level data sets from Chile, Colombia, and Slovenia and show the same puzzle holds. We show that the ALP between term can be decomposed into a term related to reallocation and a term related to the change in the total number of .ms, the latter of which often works to reduce the total between term in our data. We also show these ALP patterns can arise because of heterogeneity in labor and capital, unobserved output prices, or capacity utilization, but controlling for them only marginally helps to explain away the ALP reallocation puzzles in our micro-level data sets. We show that there is no puzzle when one decomposes aggregate productivity growth in the terms of National Accounts, as inputs in the aggregate move from low to high value activities in 36 of our 39 country-year observations. We conclude that there is a fundamental difference in re- allocation measured by the ALP decomposition and that measured by the decomposition of National Accounts growth.

Are We Undercounting Reallocation’s Contribution to Growth?

Reallocation growth occurs when an input moves from a lower marginal product to a higher marginal product activity. Three recent studies use two distinct methodologies to examine the sources of the strong surge in aggregate productivity growth (APG) in India’s manufacturing sector since 1990 following significant economic reforms. They all conclude that APG was primarily driven by within-plant increases in technical efficiency and not between-plant reallocation of inputs. Given the nature of the reforms, where many barriers to input reallocation were removed, this finding has surprised researchers and been dubbed “India’s Mysterious Manufacturing Miracle.” In this paper we show that these findings may be an artifact of the way the studies estimate reallocation. One approach counts all reallocation growth arising from the movement of intermediate inputs as technical efficiency growth. The second approach introduces measurement error into estimated reallocation by using plant-level average products - total factor productivity residuals - as a proxy for marginal products, which could be problematic as economic theory suggests that average products and marginal products are unrelated in equilibrium. Using microdata on manufacturing from 4 countries — the U.S., Chile, Colombia, and Slovenia — we show that both approaches significantly understate the true role of reallocation in economic growth. In the U.S. almost 50% of reallocation growth is due to movements of intermediate inputs, meaning if India is similar to the U.S. then reallocation’s share of total Indian manufacturing APG since 1990 increases from the previous estimate of one-third to almost two-thirds.

The Determinants and Consequences of Search Cost Heterogeneity: Evidence from Local Gasoline Markets

Information frictions play a key role in an array of economic activities and are frequently incorporated into formal models as search costs. However, little is known about the underlying source of consumer search costs and how heterogeneous they are across markets. This study analyzes the sources and magnitude of heterogeneity in consumer search costs in retail gasoline markets. In doing so, the authors also investigate the extent to which retail gasoline stations employ mixed pricing strategies. They identify hundreds of geographically isolated markets and are the first to estimate the distribution of consumer search costs for many geographic markets. They directly recover the distribution of consumer search costs, market by market, using price data for retail gasoline in the United States. They find that the distribution of consumer search costs varies significantly across geographic markets and that distribution of household income is closely associated with search cost distribution.