Retail Market Structure and Dynamics: A Three Country Comparison of Japan, the U.K. and the U.S. Jonathan Haskel, Ron Jarmin, Kazu Motohashi and Raffaella Sadun

Motivation Different aggregate economic performance across countries is driven by productivity growth Productivity growth is a function not of not only technology and other shocks, but how firms and markets respond to these shocks. Recent literature stresses the role of firm and establishment turnover in reallocating resources from less to more efficient producers -FHK forthcoming, Haskel and Sadun (2005) and Matsuura and Motohashi(2005)

Motivation (cont.) Thus, the ability of markets to reallocate resources is crucially important to the productivity growth and improved living standards

Focus on Retail The Retail sector has experienced rapid productivity growth in recent years, especially in the U.S. (do we have some OECD numbers we could cite here Basu et. al show big acceleration in US post 95 but deceleration in UK what about Japan…we know Japan has much lower productivity levels)

Our Contribution We seek to compare the structure and dynamics of the retail sectors in Japan, the UK and the US We want to see if differences in market dynamics impact the rate of resource reallocation and in turn productivity growth

Preview of Results

Data Maybe a table with countries across the top and data attributes down the side Attributes would include –Universe –yes/no –Source – census/survey/admin records/combo –Primary unit – estab/local unit –Other units – firm/tax entity –Frequency –Longitudinal linkage method – tax id/survey id/long id/name and address/combo –Classification – industry/location/firm type –Key variables – sales/emp/etc

Structure of the Retail Sector

Structure Cont.

Size Distribution

Basic results on Dynamics

More on basic dynamics

More systematic approach to comparing the dynamics of the retail sector across the three countries We compare the cross sectional dispersion (standard deviation) of establishment and firm growth rates. We use the DHS growth rate measure which permits entry and exit:

Cross Sectional Dispersion in firm and establishment growth rates Cell based approach –Establishment and Firm micro data for the three countries are confidential and cant leave statistical offices –We compute comparable statistics based on the micro data for pre-defined cells. Mean and standard deviation of establishment and firm employment growth rates (γ)

How does this reallocation affect the composition and structure of the retail sectors of the three countries? Does churning result in changing market shares? Or is it limited to only the smallest units? We examine transitions between size class quintiles

Impact of retail sector dynamics on market structure

Impact of retail sector dynamics on employment growth