On the economics of regulated early closing hours: some evidence from Canada

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Abstract
In many countries such as Australia, Canada and Britain, the hours of daily retail operation are controlled through the political process. This paper tests one hypothesis for why regulation is adopted. The hypothesis is that early closing hours are a low cost institutional response to net social costs that can arise when time is used competitively to redistribute customers spatially. Competition produces this result when stores's marginal customers value longer shopping hours more highly than the average customer. Evidence is presented on the characteristics of 45 Ontario cities that had the choice of whether or not to adopt early closing hours and logit analysis is used to test the model's predictions. The estimates of the probability of choosing early closing hours are then used to test the model's prediction on store density. In general, the evidence is consistent with the hypothesis that municipal control over shopping hours in Ontario is appropriate.

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