Seminar

Lobbying by Retailers and Urban Traffic Policy

Antonio Russo (European University Institute - Florence)

June 20, 2014, 10:00–11:15

Toulouse

Room MS 001

Public Economics Workshop

Abstract

Local governments tend to underprice access to urban roads and parking spaces. We study this issue from a political economy perspective, using the “Protection for Sale” approach (Grossman and Helpman, 1994). We consider a linear city where consumers buy a homogeneous good either from traditional retailers, located in a shopping street, or in superstores at the city outskirts. The local government charges a fee (parking fee or road toll) to cars in the shopping street. We relate retailers’ incentives to lobby on the fee to their cost structure and to competitive pressures. Traditional retailers lobby against the fee, as it reduces (resp. increases) the quantity of consumers in the shopping street (resp. superstores). Superstores support it only if it is low enough to discourage entry of a similar competitor. Moreover, if price competition among superstores strongly erodes margins, their support for the fee is weak, traditional retailers exert the largest influence on the government and the fee is set below the optimum. The results are robust to several extensions, including availability of public transport as an alternative travel mode, differentiated goods sold in the shopping street and superstores and expansion of superstores within the shopping street. Finally, we consider lobbying by residents within the shopping street. They may support the parking fee since it curbs traffic in their neighborhood, but only as long as it does not induce a significant exit of traditional retailers.