Quantitative evaluation of benefits of place-based policies for retail agglomeration

Local governments have recently adopted place-based policies in order to revitalize decayed shopping areas in downtown areas. Developing a multipurpose shopping model, we quantitatively evaluate the welfare impacts of place-based policies for downtown retail agglomeration. In the model, retail stores are under monopolistic competition, and households are free to choose where to reside. Results show that, whether or not place-based policies are efficient depends on the recipients of government subsidies, even if the policies promote retail agglomeration in downtown areas. We show that the total benefits of location subsidies to households and location subsidies to stores are 566 and −342 million JPY per year, respectively.