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Superstores or Mom and Pops? Technology Adoption and Productivity Differences in Retail Trade

Staff Report 428 | Published June 11, 2009

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Author

David P. Lagakos

Superstores or Mom and Pops? Technology Adoption and Productivity Differences in Retail Trade

Abstract

I document that cross-country productivity differences in retail trade, which employs around 20% of workers, are accounted for in large part by compositional differences. In richer countries, most retailing is done in modern stores, with high measured output per worker, whereas in developing countries, retail trade is dominated by less-productive traditional stores. I hypothesize that developing countries rationally adopt few modern stores since car ownership rates are low. A simple quantitative model of home production supports the role of cars in determining the composition of retail technologies used and retail-sector productivity differences across countries.