How does big-box retail entry affect labor productivity in durable goods retailing? A synthetic control approach

Using data from 2001 to 2012, the effects of IKEA entry in four Swedish municipalities, 2004–2007, on labor productivity in durable goods retailing is investigated using synthetic control methods. We contribute to the literature on synthetic control methods by considering parametric specifications of the intervention effect, which improves the likelihood of identifying the effect of IKEA entry on labor productivity. Our results indicate that in three out of four entry municipalities, labor productivity increased more than in their synthetic counterparts after IKEA entry, and that larger positive effects are found in rural municipalities where the new IKEA was large relative to the existing durable goods retail market.