DP3039 Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry

Author(s): Marianne Bertrand, Francis Kramarz
Publication Date: November 2001
Keyword(s): employment, retail trade, zoning regulation
JEL(s): J23, L43, L81
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3039

Does entry regulation hinder job creation? We investigate this question in the context of the French retail industry, a sector that has experienced especially low rates of job creation over the last 25 years. Since the early 70s, the French government has required regional zoning board approval for the creation or extension of any large retail store. Using a unique database that provides time and regional variation in boards' approval decisions, we show that this requirement created barriers to entry in the retail sector. We also show that these barriers to entry, either measured directly by approval rates or predicted by the political composition of the boards, weakened employment growth in the retail industry. Our findings indicate that retail employment could have been more than 10% higher today had entry regulation not been introduced. Promoting product market competition may thus be a key reform for countries with poor employment performance.