The Effect of Trade Liberalization on Food Retail Structure and Food Price Levels in Italy: an Empirical Analysis

Abstract

In the last two decades the Italian food retail landscape has changed considerably also thanks to the LD 114/1998 and subsequent trade liberalization laws. In this study, we investigate the impact of LD 114/1998 on the structure of the Italian food retailing industry and on the food and beverage price index. We use difference–in–difference to compare the level of concentration, number of stores, average store size and in-store services in regions enacting changes mandated by the LD 114/1998, versus those which did not; we also measure both the direct and indirect (through change in retail structure) policy effects on food price levels. Results show that, once the endogenous nature of policy changes is controlled for, the policy appears affecting more smaller than larger outlets, although facilitating consolidation across store formats. The effects on price levels seem mixed, varying in function of the structural metric considered, however showing no overall effect. Last, the effect of the liberalization seems to be more modest in regions where the level of liberalization implemented is “low”.