Entry regulations and labor market outcomes: evidence from the Italian retail trade sector

TLDR

In Italy, the opening of large retail outlets is regulated at the regional level. The paper analyzes the relationship between barriers to entry and employment in the Italian retail trade sector. Using differences‑in‑differences estimators, the study compares the effects of divergent entry policies in Abruzzo and Marche, two similar regions, where Abruzzo imposed tight restrictions and Marche did not. Entry barriers negatively and substantially reduce employment growth, while stronger competition appears to foster more efficient small retail shops, a result that is robust to multiple checks.

Abstract

The paper analyzes the relationship between barriers to entry and employment in the Italian retail trade sector. In Italy the opening of large outlets is regulated at the regional level. By using differences-in-differences estimators I study the effects of the rules implemented in Abruzzo and Marche, two otherwise close and similar Italian regions, that adopted very different policies: the first set tight restrictions on the opening of large stores; the second did not impose substantial entry barriers. The results show that entry barriers have a negative and sizeable impact on employment growth. Some evidence is also found that fiercer competition encourages the development of more efficient small retail trade shops. These findings are robust to a number of checks.