Gentrification and retail churn: Theory and evidence

Abstract

How does gentrification transform neighborhood retail amenities? This paper presents a model in which gentrification harms incumbent residents by increasing rental costs and by eliminating distinctive local stores. While rising rents can be offset with targeted transfers, the destruction of neighborhood character can – in principle – reduce overall social surplus. Empirically we find that gentrifying neighborhoods experience faster growth in both the number of retail establishments and business closure rates than their non-gentrifying counterparts. However, we see little evidence that gentrification is associated with changes in retail mix or prices — suggesting limited welfare losses.